Swing Trading Strategy:

Time to retest?

You had a massive sell-off yesterday, where SPX dropped 4.4% and 114 points. Not the ideal look for a market that has now sold off two straight days and puts in jeopardy the rally off of last week’s lows. This is where traders have to decide for themselves whether they are going to start booking their gains over the past week, or risk being shaken out later and the rally being all for nothing. I came into yesterday short on the market and continue to hold those short positions into today as well. I may even use some of the early morning strength to increase my short position in the market . 

Indicators

• Volatility Index (VIX) – Nothing major for the VIX and even went negative in the early going, but finished 6.6% higher on the day which is less than what you’d expect on a day where the market dropped over 4%. Nonetheless, you didn’t see any panic selling or large drops on the indices, but instead it was a slow trickle lower, and that kept volatility on the sidelines. 
• T2108 (% of stocks trading above their 40-day moving average): Saw a 24% drop yesterday as the indicator dipped back below 5% again. Still a very extreme reading. 
• Moving averages (SPX): Broke back below the 5-day and 10-day moving averages, and now back below all the major moving averages. 
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Sectors to Watch Today

No sector was spared yesterday, but still of most interest to me is the fact that Real Estate continues to see the greatest amount of weakness. Energy looks to get a boost today with China stock piling oil now and sending crude futs up 10%. Be careful with the Financials as that is one sector that could see some headline risk in the coming days as this pandemic and economic shutdown continues to roll on. 

My Market Sentiment