The good news was we did not see a continuation of selling we saw at Monday prior to a late day rally. However, the bounce was quite weak with volume collapsing more than 20% across the board and with small gains. At least the Russell 2000 was able to grab the lead. Gun stocks continue their runs as Obama announced new executive orders on gun purchases. AAPL reversed its gains yesterday as fears over a halt in production sent traders selling the stock. Other than a few thinner names there is not much to get excited about this stock market. Good news is we did not sell off further, but we did not see anyone rush in and support this market. Cash will remain king until further clarity is provided by this market. Patience is a virtue.
This is not how you want to start off the year trading. Lackluster trade and leading stocks continuing to act weak is a recipe for disaster. While we can always rebound from these conditions it is going to take quite a bit of work to do so. We did close green on the S&P 500 and Dow so we have day one of an attempted rally. Days 4-7 would be ideal to get heavy volume buying pushing the indexes up significantly. We can follow-through after day 7, but powerful rallies will see a follow-through day relatively close to day one. We will remain patient and continue to roll with our strategy. At the moment we are cash heavy and stalking our prey.
If we do happen to move lower taking out Monday’s lows this market will be in some serious trouble. Tomorrow we will see the Fed minutes from their December 16th meeting. Who knows what will be in there and even if we did there is no guarantee we would know which direction this market would head in. There is the potential the market does move on the minutes and as the market acts we’ll react.
Stay patient and if you do get trade signals your exit is much more important than your entry! Cut your losses.
