This is an abbreviated version of today’s Premium Strategy Session – April 22, 2024
Dan Fitzpatrick here at StockMarketMentor.com. I want to look at the S&P ( INDEXSP: .INX ) and the NASDAQ in a little different way in just a second.
Let’s just look at it this way, that’s where the trend was, right along the 20-day moving average and then this thing broke through. We had a nice channel here, we broke through, this was a gap and crap, big volume on the S&P ( INDEXSP: .INX ) on Thursday the 4th.
I said this, and Scott said this, even though we got a rebound the next day Scott’s words were, “This really scared me.” I wasn’t maybe quite that adamant, but I did say, “This is a sea change.” This does not happen in healthy uptrends that ultimately keep going. This is a sign of, you could say it’s a shot across the bow.
I don’t call things that get crushed like this and then keep going, I don’t call that a shot across the bow. I call that, hey man, we hit the hull, that’s the end. And that is really what we’ve seen here. We break through the 20, get a little, let’s suck them in buddy, and then we get this other move lower below the 50-day moving average.
This really completed the route, with respect to the Bulls deciding they’re going to buy the dip. Buying the dip hasn’t really worked well. And so we get a continued move lower, and now we have a little rally here, So the question is, is this it? Maybe we’re just going to go back up here. So this is a shot across the bow.
If after this kind of move, this kind of big breakdown here, break below here, if the S&P ( INDEXSP: .INX ) comes back up, maybe ever regains the 50-day moving average, but if it comes back up a little bit it can lull you into saying, oh this is a buy the dip, I’ve got to get in. If it comes up even more, okay, that’s great, then everybody’s back in.
And then ultimately what happens is, we get this kind of move, and then this kind of move, and it’s down here. You are left here holding the bag and you are wondering what happened. You are saying, how could this have happened? And then you’ll say, well, what could have been the early warning for me?
And I will say, this was the early warning. Now this is a shot across the bow. Now just this little thing here, but the whole big selloff, it’s still not a shot across the bow. It’s confirmed as the “shot across the bow”, which is just a term that I coined a long time ago, meaning, not that the market turned, but the market turned and then came back into the channel and continued for a while.
Then in retrospect you say, where could I have seen this earlier, and it’s right here, this is the shot across the bow if we get more of a rally. The point is this, I don’t expect much of this. I’m looking at individual stocks and I don’t expect much of them either. I’m completely in cash in my trading account. Other longer-term stuff, full speed ahead, whatever, it’s a pullback.
For now as a trader, I don’t really see anything I want to buy, or anything that I want to exchange my money for, right here right now. That’s what you want to be asking yourself always, but certainly in situations like this where you say, okay, I have cash. Is there a stock that I would like to exchange my cash for right here right now?
What I’m seeing is, a lot of stocks that I’m saying, no, not right here right now, but maybe right there right then, sometime in the future. So I would just say, stand pat right now. Don’t really do much, do your research. Look for stocks that are close to working but not quite and then just stock those.
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