Every week it seems like we’re in “No mans land” in terms of stable market trend. Playing extremes: buying in to support, selling in to resistance has turned out to be very profitable. We are entering the first week in July, and it seems premature say volatility is behind us considering what has unfolded during the last few summers. Using technical analysis, you can clearly see the 50 day moving average is still sloping downward. People often misinterpret the moving averages as slope is the most important aspect of it. A reliable up trend will have the 20 and 50 day moving average curling up. We haven’t seen that yet, which can lead to many false starts.
This is still very much a “Day traders market” as many leading names are still technically damaged. During a corrective phase, there are name that will be stripped of their leadership permanently. That’s why buying into these names on a break down canbe very dangerous as you have no idea if they will ever resume prior role. During a corrective phase you should also be very wary of anyone perma-bearish embracing you as one of their own. As a trader you need to embrace change in real time. There’s no room for asking questions like” Why?” when you should be asking “What?”.
What the market doing is more important than coming up with excuses for why. Newer traders think there needs to be a reason for every reaction in the market and that’s just not true. Learn to only trust price and volume because they are the only reliable friends you have in a market that’s looking to put you out of business daily.
A healthy pullback will allow us to separate the boys from the men. We’ll be able to tell which stocks are going up because they should not because they’re caught up in the bullish euphoria we’ve had these past two sessions. I would like to see how we hold onto these gains first before I start positioning myself heavily on the long side. We’re becoming very overbought by few different metrics telling me it’s not yet the time to open long yet.
McClellan Oscillator – We’re entering levels in the past that has resulted in at least a pullback.
