Buyers had post Federal Reserve policy statement hangover for much of the trading session. Volume rose on the NASDAQ, but fell on the S&P 500. Price action looks pretty iffy on both indices with the S&P 500 joining the NASDAQ composite below their respective 50 day moving average. AAPL continued lower as volume perked up. The stock had been consolidating above its 50 day moving average, but has succumbed to selling pressure the past two days. Even a mid-day push was unable to get the market back to the highs of the session. We remain in a downtrend and we should react as such.
In the short term the market is somewhat oversold, but in a downtrend/bear market oversold conditions can last much longer than you think they should. An interesting development is the lack of oomph in the VIX. Given the today’s move in the market the VIX, in my view should be higher. Could it be anything? It is anyone’s guess, something to pay attention to over the next few days. This situation could be brought on by options expiry this Friday.
Once again the Shanghai Composite is hitting another 52 week low (at the time of writing). I will try to avoid talking about the Shanghai as a daily occurrence, but I want to highlight there is something going on in China. Trend followers are short China, the reason for the move is irrelevant and will become apparent at some point. But, who cares? Live in the now!
AAPL is having back to back tough days. The stock is a favorite amongst large cap growth investors and traders. It is no wonder the stock has held up, but the stock is under some pressure here. No matter what you think the stock should be worth the recent action is something to take notice. The stock has lacked accumulation for quite some time and suggests the big institutional buyers do not have the appetite to accumulate more shares.
Stick to the plan and always cut your losses.
How much cash should we be holding now ? This is getting very confusing.
This isn’t confusing if you are taking the trades. Every professional knows this is the most volatile market in 40 years. It is a volatile market it is what it is. Depending on accounts 50-75% cash. Trendless markets are meant to confuse to people. It doesn’t confuse me. I flow with it like water until the water finds a path to flow up or down. Water has an easier time flowing down. You can’t beat the market 100% of the time. This is why you cut losses. If it is confusing to you, go to all cash. We remain in a partial sell mode (neutral mode if you are going off 100% long, buy, cash signals). If you are not fast in this market you are going to die. It will slow down. Nothing stays the same.
40% invested in margin account and IRA account on my end.
IN ORDER FOR THE MARKET TO CONFIRM ITS IN A DOWNTREND WILL IT HAVE A FOLLOW THROUGH DAY TOO?
No you do not need a FTD to confirm a new downtrend, you need a cluster of distribution days. However, I don’t have evidence to the contrary…it would be an interesting study to do though.