I’ve been out of town traveling over the weekend and as I’m just returning and it’s late, I probably won’t get a chance to look the charts over until tomorrow. Nothing has really changed since last week: The markets hit key support last Monday while oversold and with positive divergences across basically every key index and sector to boot and as such, the near-term (days to possibly weeks) technical outlook is bullish while the fundamentals in both the US, most European and many other key countries around the world clearly continue to deteriorate.
Even with a near-term bullish technical outlook, the intermediate term (weeks to months downtrend coupled with the clearly deteriorating fundamental picture is about as a good enough reason, IMO, to continue to keep things light for now. Keeping things “light” can mean different things for different people. Some more active/experienced traders might take advantage of the current volatility to trade off of the intraday charts, maybe exclusively day trading or swing trades only lasting a few days (hit-n-run trading, as I like to call it). An investor who thinks we may have put in, or are still in the process of putting in a more lasting bottom might be selectively scaling into longs, with the appropriate stops. On the flip-side, a trader with a more bearish view looking for a resumption of the downtrend soon might be scaling in short as certain stocks or sectors bounce back to resistance. Regardless of one’s views or strategy at this time, keeping it light means not deploying 100% or more (via the use of margin) of your capital on any one side of the trade (long or short), especially on overnight positions.
One other way to express my thoughts is that I might put the odds of the next week being up vs. down at, say, 3 to1. Those are pretty decent odds, right? All other things being equal, yes. However, although the odds of the market going higher might be several times that of it going lower, the odds of a 500+ point Dow gap down in the near future is many times higher than the odds of a 500 or even 300 point gap higher if, for example, we woke up to some large bank or brokerage firm failure or maybe news of a sovereign default. Basically, the R/R (risk to reward ratio), does not warrant trading either side of the market very aggressively at this point in time.
As I go over the charts tomorrow, I will look for some new long and short set-ups. I also have a few new features on the site that should be ready this week that I will go over soon as well. Finally, I have a little more updating to do on the trade ideas, particularly those in the the Active Trades but you will note that one of the new improvements to the site is the addition of a date immediately to the right of each of the trade ideas. This is the date of the last post made regarding that trade so it you will be able to quickly glance at a symbol that you are trading or following to see if there have been any updates posted on that trade since you last visited the site.