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The most obvious change in character that the market has displayed recently is how amenable traders are to sell into strength. Previously, the playbook was to buy every dip and hold on for dear life all the way up. Seeing as we are still far away from official bear market territory, the presumption is that this “sell the rally” attitude is temporary and will soon be replaced with an aggressive dip-buying mentality once again. However, trying to precisely time that inflection point is likely to be fool’s gold. As we saw last summer, we can remain in a sluggish, corrective market for months on end.
Today, many traders are actively looking to time the precise bottom, as they have been doing for the past week or so. While I am watching attentively and ready to pounce if I see signs of a bottom, I will not step in front of the train. Looking at the month of June via the 30-minute chart of the SPY (actively traded ETF for the S&P 500), we continue to see a series of bear flags in a downtrend. Moreover, the 20 period moving average is still acting as a brick wall of resistance. While there are indicators telling us that the market is oversold, we know that oversold markets can remain that way just as overbought market can remain overbought.
The bottom line is that if you consider yourself to be a trader who adheres to price action and volume as your two primary sources of analysis, then you are doing yourself a disservice by walking in every morning this June and sticking in bids to try to “nail the bottom.”
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tru dat. hope you’re well, good sir.
you too