This market continues to be rocky and one lacking any sense of a direction. Standing on the sidelines is not a bad place to be until we get clarity from this market one way or another. For seasoned traders who are able to cut losses quickly and position sizing can operate here. Newbies should stand aside and wait for a clearer picture from the market. Thursday’s market session will be the last for March as the market is closed for Good Friday. It will be interesting to see how we see the market trade over the course of the day. Will we see the intraday volatility we have been seeing as of late? Time will tell, but we have positioned ourselves for this type of market. We will continue to react in accordance to our rules and with price action.
Sentiment has not really swung overly bearish. AAII Bears ended the week at 35.33%. Certainly its highest level in a few weeks, but it is not above 40%. Bulls remain above 30% for the week in a surprise move given how we have seen this market swing wildly since last week. Sentiment has not been a great indicator to the downside. Sure, when AAII saw Bulls drop into the 20s it was a sign the market would swing back higher. Now, we have a much different market then what we saw from the lows in 2016.
FANG stocks are likely to see a breakup here. FB and GOOGL are now below their respective 200-day moving averages. There is a ton of distribution in both charts as traders are moving away from these two big cap technology stocks. AAPL and AMZN are below their respective 50-day moving averages, but still hang on and consolidate properly. NFLX dove to its 50 day moving average, but was able to close above the key moving average. Certainly a lot of caution being thrown to the wind and traders must not play hero ball and focus on capital preservation.
There is no telling where the market will go next. Our first order is to preserve our capital. No need to stretch your neck out in this type of market whatsoever if you cannot control your risk through position sizing and exits. Most trade on emotion and are unable to handle the stress of a volatile market. We strongly suggest standing aside if you are newbie and have yet to master risk management. We hope you enjoy the long weekend!
