The morning has been all buyers, contrary to my original thesis. The dip buyers are out and about, dressed like knights and swinging their rubber swords like drunken barbarians from northern Europe. I have a couple of big wins occurring today, and thus I must pen a bullish post to stop this reflexive jerk higher in its tracks.
The rally has found sellers at the second important level I highlighted this morning. A thin void in volume was left behind during the big selloff and thus far we’ve seen a rejection of the level by sellers. The main question we need to be asking ourselves is what type of momentum environment are we in? Buy the dip has been the script since the year started, but now we may be on the other side of the mountain.
The main thing I’m on the lookout for today and the remainder of this week is range compression. If we see the market stalling out and balancing into a tight range, we may be experiencing only a counter trend reflex rally. Given the overall context of our market this year, and where we are in the trend, this is a less likely scenario, but it’s worth giving consideration.
Yesterday and today (already) have featured wide range, snap-back, action. If we see a tight day before the weekend, I think that’s your cue to take any hard earned profits on the long side and consider trimming exposure, adding some hedges, or shorting broken charts.
In the meantime, keep ZNGA, ANGI, TPX, KORS, and CMG on your radar. I’m long all of them, and they all look ready to pump. VHC is also wanting a pump. I don’t have Z yet but stalking.
Note: as of this post, I’m 50% cash and up 2% on the day. Call it crack rock portfolio.
Stay nimble, be water.
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