With my internet out, I am at my local coffee shop. In between being THAT guy at the cafe, wearing a beret and discussing Engels and Marx with my table mate, it occurred to me that many charts have been able to work off overbought conditions during the past two weeks. They have done so without a sharp broad market selloff.
We are seeing underperforming sectors now starting to outperform today, namely the financials, energy and steel names, indicating a sector rotation. Money rotating out of extended leaders, such as in tech, and moving over to the laggards is a sign of a market that does not want to roll over, in my estimation. To me, a big part of trading is about assessing probable outcomes. When trying to ascertain whether this market is topping out, I am going to look at underlying strength and sentiment. With many traders displaying an incredulous at the strength we saw in September, perhaps the first few weeks of October will prove that last month was no anomaly?
There are even some charts that looked to have seen a classic breakdown, but have recovered nicely. As an example, take a look at $AAPL. You will recall that on Tuesday of this week, Apple had a mini flash crash in the morning. Ever since then, though, note how well the stock has recovered, even during down days.
- LONG: 56% ($ATPG $CRZO $CSTR $GNK $GS $HMIN $TIE)
- SHORT: 8% ($QID)
CASH: 36%Comments »