Swing Trading Strategy:

Market Reality Check…

Last three weeks the market has been riding the hope train and now suddenly price action is bleeding red across the board. Is this simply a buy the dip opportunity like March 23rd was, but to a lesser extent? Or are we jump starting the next leg lower? 

The economy can’t be switched on and off like a light switch, and unlike what the politicians are telling you, the economy is going to have significant challenges getting things back to the way they used to be. Earnings are underway, and it will be interesting to see what kind of insight we get into how the shutdown is affecting companies. I came into the day 100%  cash, and will look to start building some short exposure today as a result. 

Indicators

• Volatility Index (VIX) – Dropped 8.3% yesterday and looking at a potential move back into the 42’s at the open today. 
• T2108 (% of stocks trading above their 40-day moving average): A 42% rally on the indicator, takes it back up to 28 and well off of oversold conditions.
• Moving averages (SPX): Closing in on a test of the 50-day moving average, but I would look for a retest of the 5-day MA that has held up well of late. 
• RELATED: Patterns to Profits: Training Course

Sectors to Watch Today

Technology continued its stampede to the upside for the past two days, and has suddenly become a safe haven for traders. With today’s weakness and the potential for another leg down, look to Real Estate and Industrials to lead the way, in terms of weakness. 

My Market Sentiment