One of the more critical aspects about a market which changes character is being able to see the potential for more than one probable scenario to play out. As an example, we know that the broad-based upside momentum in the market has clearly cooled off since last week’s dramatic reversal. However, the market has not yet rolled over, perplexing bears in the process.
Another scenario could easily be one where we continue on with standard “summer trading” of tedious broad market action. In that scenario, market leadership is bound to be far less broad-based than we saw have previously seen. But there would indeed be opportunities in areas of the market acting well, such as select retail (CROX MW WTSL, for example), chemicals (CE FMC HUN ROC) and long-term bearish to bullish reversals such as GLW WWE, and perhaps the solars as well.
When trying to gauge the odds of that scenario developing, I am still using the roadmap we started looking at late-last week: The 30-minute chart of the S&P 500 Index. The goalposts are still in place. And a convincing breach of the 1635 (1642 before then likely opens the floodgates) open the door to a swift move lower. On the upside, 1660 market a lower high yesterday.
But this pattern is still the controlling one, and as long as it is in play I am operating under the idea there are select longs and short opportunities.
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