From the Trading Desk

Stocks Stall out at Highs, Volume Jumps

Tuesday was not the type of day you would expect after the mornings strength. Volume rose on the session as traders left as quickly as they entered the market Tuesday morning. The high turnover produced a bearish reversal for the first time in quite some time. AAPL hit another all-time high, but by the end-of-the-day had surrendered majority of the day’s gains. Unfortunately, AAPL was not alone as many stocks gave up their gains during Tuesday’s session. Small caps were once again leading to the downside today and are endanger of heading back towards May’s lows. The group just cannot catch a break and buck the trend of the worse performing major index. The Dow continues to reign supreme only closing lower by 15bps. One day does not make a trend, but Tuesday’s session raised some eyebrows and we were happy to move up stocks on lagging positions. Keep grinding and continue to protect your backside.

Wednesday’s action should be interesting as futures are already pointing to a lower open. We are not seeing the market open lower by 1% or more, but losses should be noticeable as indicated prior to 7am EDT on Wednesday morning. Bears will be out in FULL FORCE today harping on valuations and whatever else they can get their hands on. European markets are suffering this morning as well with the DAX down more than 1%. Over the past month and a half, the DAX has been rolling over after hitting highs in June. It is now in a downtrend and it will be interesting to see how the ECB reacts at its next meeting. As we continue to point out one day does not make a trend and it will take a bit more selling to knock this uptrend off its footings.

The most important factor here will be controlling your emotions. Do not overreact and do not act outside of what your system tells you to do. Far too many traders get themselves into a problem as they trade outside their system. What they tell themselves is they are smarter and override what the system tells them to do. It happens repeatedly. Avoid the common mistake and stick to solid rules. Risk management is paramount. Cutting your losses quickly and having proper position sizes is what YOU need. Sophisticated entries simply do not add a whole lot of value when you boil it down to the bone. Focus on what matters and ignore the rest.

We hope you have a great trading day and to always cut your losses short.

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