As this market continues to struggle with US-Chinese trade worries and an inverted yield Monday’s market saw stocks rise. NASDAQ Composite led all market indexes followed by the Russell 2000. Volume was lower than Friday’s session. Renewed hopes of trade talks resuming certainly helped ease traders’ fears. Who will blink first in this trade dispute and when will a deal be made? For now, we must contend with a seasonally weak period in the calendar for stocks. We do not want to fight this tape, but we also do not want to have a closed mind. Price action will always reign supreme with us and everything else will be noise generated by the Wall Street machine.
There are some signs of life. Believe it or not stocks like SNAP, TWTR, and PINS are holding up relatively well in this market environment. We must keep an eye on stocks bucking the overall trend as they are the best to jump on when this market environment turns positive. Just because these stocks are holding up does not mean they are necessary to accumulate here. We remain in an environment where downside risk is a very real thing. The last thing we want to do is overexpose ourselves to unnecessary risk eroding away our dry powder. What will we do when the market turns, but we have no dry powder? Stay disciplined and protect your capital.
Now, we have SPY in a bearish flag pattern and certainly looks like more downside is coming our way. IWM continues to be weak and in a downtrend. QQQ is in a similar pattern to SPY. Early August lows are something we must pay attention to as it will be a pivotal point for the market. Take those lows out and we will see a flood of sellers. June lows are next in line, and it would not surprise us if we head back to those levels. The good news in all of this is the market will find a seasonally positive period coming. Major bottoms to occur this time of year and it wouldn’t catch us off guard if another were to form. Stay focused and discipline regardless of what you are feeling. There are better days ahead.
We hope you have a great week of trading.
