Full-time stock trader. Follow me here and on 12631
Joined Apr 1, 2010
8,861 Blog Posts

It’s All Fun and Games…


…until you breakdown from a bear flag.

We have the makings of a nasty trap that complacent bulls may have fallen into, out for an enjoyable kayak ride only to start sliding down a huge waterfall. Breadth is soundly weak, with the Nasdaq the clear laggard of the senior indices after this morning’s opening gap lower. The retail and consumer discretionary sectors are also suffering some ugly breakdowns after wedging higher over the past two weeks. High-flying stocks like CMG are finally cracking, while the small-caps are seeing a particularly ugly gap down on their daily sector ETF chart, IWM. Heck. even Wal-Mart is getting smacked around.

Thus, risk appetite for some of the higher beta areas of the market is clearly far more suppressed than what we have seen at any point since 2012 began. The bear flags on various index daily charts that I discussed last week and over the weekend in my video recap appear to be confirming to the downside. If the bulls are going to turn this breakdown into a “fakedown,” they had better step up quickly and reverse this move by the closing bell. Otherwise, my sense is that we have some trapped longs that may need a few more down days to capitulate.

My stance continues to be the same: Although I walked into today net short, I still have a heavy portfolio cash position, The cash position is a nod of respect to the fact that this market is still on an overall uptrend, making broad higher highs and higher lows since last October’s 1074 bottom on the S&P 500 index. Hence, there is no telling just how deep or shallow this correction can go.

All of my trades and portfolio allocation percentages are available inside the 12631 Trading Service, a vibrant community for traders that @RaginCajun and I direct within The PPT. Please click on those hyperlinks for more details, and feel free to ask any questions.

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One comment

  1. Sooz

    Really since the 3rd week in March it’s been adventurous. The 5.75 months previous was a total((BLAST))

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