is when you are in cash.
I’m betting that the market is going to correct starting later today or next week and I can be totally wrong. And to stand by my bet, I’ve raised my cash level to 67% as of now.
Why am I making such a bet?
Take a look at the daily $SPY chart below:
I asked myself what is $SPY “not” doing?
It is not taking off in a big way to follow up with yesterday momentum. Regarding yesterday momentum up day, did you notice that the volume was less than the volume of the previous down day?
It is very possible that we are looking at a dead cat bounce and again, it is possible I’m very wrong. Some will say we are bouncing right off the 79 sma line. That is very true too. As much as I can see the bounce, the underlying lower volume behind the bounce bothers me.
So, what’s wrong with my being wrong?
Nothing.
I’ll just have to start nibble back in next week if the market continues to head skyward.
On the other hand, I could be looking for bargain hunting.
Either way, I’m feeling quite peaceful with a high level of cash as of now.
My 2 cents.
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I don’t know many traders who will cite the 79 SMA, but I’m glad you did.
Shhh…. the less popular it is, the more useful it is. I do not remember where I get the 79 SMA; but I’ve found this MA to be quite “magical” from time to time. Come to think of it, any popular MAs are magical from time to time. You just need to find one that fits you like a glove…
Thanks for the comment.
Cheers!
You can probably find some SMA acting as support for any stock on any day. Whether it’s the 10, 20, 86, 139.437 whatever.
Very true, you can curve fit any stock with a SMA that lands right below the stock to act as a support; but then you are forcing your bias onto the stock. However, by using a “consistent” SMA number that you call “home”, you are building a “statistical reference” based on your personal observation of how the stocks react to the consistent SMA number. Sure, the stocks may not necessarily bounce on the SMA of your preference, but you will build enough observation and experience around it that the decision you make at that point will automatically include your own calculated risk.
E.g. when a stock starts to trade down near the 79 sma, I can choose to play a “catch the falling knife” trade with a stop below the 79 sma.
In summary, having your own consistent SMA will allow you to take trade that has small risk.
Cheers!