The current price action in the market is your typical, drifting summer doldrums. As opposed to the distinct emotions at play during sharp, fear-based sell-offs, it is human nature in a lethargic market to be lulled into a sense of complacency and even boredom. When that happens, it is easy to become sloppy in your approach, making low probability trades just for the sake of looking for action. Rather than acquiescing, though, the better approach is to usually accept these types of markets as challenges to your discipline as a trader, protecting capital and confidence while letting the dust settle. Along the way, many a bold prediction will go unrealized, rending most traders stupefied before the choppy action is all said and done.
We may very well be nearing the final stages of the broad market correction that we have seen since April, but that is not of much consolation for underwater longs dating back to last week. This is the fifth day in a row we are lower, with the Nasdaq Composite falling back below its key, multi-year 2,900 level.
At the very least, some of the better-performing stocks this summer have needed more time to base out. Continuing to stalk this market from the sidelines is still the way I am largely playing this malaise, as stocks are capable of turning on a dime. As I pointed out to 12631 members yesterday, as demoralizing as this action may feel, all the S&P 500 has really done is pull back into prior resistance (1335), as well as the support trendline dating back to the June 4th low.
In other words, don’t give up on the rest of the summer just yet.
_______________________________
I think there is going to be a huge change in mood after the conventions and the Pres. campaigns get rolling in earnest.