Jitters are swirling on Wall-Street, and the Bad-News Bears seem to be doing everything they can to cast a shadow of doubt on this market. Over the last two days, the market has responded well to the major sell-off that we saw on Monday. However, the volume has been extremely low on both the DOW and S&P, while the NASDAQ’s volume on the previous two days of rallying has been average.
If we are indeed looking at a significant pullback, then it won’t happen without a fight from the bulls. They are going to want the trend to continue, and on any kind of dip, there will be buying, much like what we saw today, when the markets opened up about 1% down only to close the gap and finish strong on the day. What will be telling, is when the bulls try to buy the dip, and their efforts backfire, only to see the markets trend lower; then we will have a clear indication that we are in store for an extended pullback.
I initiated two new short positions in BB&T Corp (BBT) and UnitedHealth Group (UNH). On BBT, I got in at 27.25, and then again at 27.75. I didn’t double-down at all, which is something I strong advocate against, instead I initated a 1/3 of my position capital at 27.25, and then committed another 1/3 at 27.75. I will look to add more if it drops down to 28.26 – at which point I will be fully vested. If it sells off hard tomorrow, I will commit the last 1/3 of my position capital at 26.46.
On UNH, I shorted it at $28. I committed half of my position at that price, and will commit the second half of my position around 28.56 if it rallies tomorrow, if not, then I will commit the second half of my position at 27.18. It is all about minimizing potential losses and keeping them as much as possible to a minimum.
A lot of people are expecting this market to sell-off hard here in the coming weeks, including myself and Matt, it has only taken a small step towards that direction with the hard sell-off that we saw on Monday. Be careful about moving too fast against this market in the days ahead – test the waters one foot at a time. .
It will be interesting to see what the market has in store for us tomorrow.
Here’s the NASDAQ and S&P charts…