Without any major economic news stocks opened the day gapping higher setting a positive tone for the day. The US dollar ran into trouble sending precious metals higher on the day. Gold and silver had been consolidating its move higher in August and quite nicely. Today, we saw precious metals breakout in a textbook manner sending gold stocks higher. Even with precious metals moving higher their stocks weren’t immune to selling which began just after noon time. Sellers picked up the pace throughout the afternoon and by 2:30pm EDT stocks appeared to reversing hard on volume. Buyers weren’t having any part of that and won the battle with sellers with leading quality stocks at the helm. Chalk up another positive day for the market when it fights off sellers and leading stocks take a significant lead.
There isn’t anything complicated about the market, but it is dealing with your emotions is the key to the game. Entering into a position there is a plan of execution and straying from the plan because of your emotions can cost you your position. It is your emotions that will hold you back, keep them in check and have a plan of attack prior to making the trade.
Looking back at today it was quite a nice day, but do not get over confident because at any moment we can reverse lower on volume negating the action we have at the moment. The S&P 50o has 4 distribution days while the NASDAQ has 3. Now, if we get more heavy volume reversals that would be an alarm to get cautious. We simply can’t anticipate selling because we have quality growth stocks leading this market. If we didn’t have these stocks leading I would be more cautious here. At this point there isn’t much out there that would make me terribly cautious other than the state of our economy. Remember, the Dow climbed 288% from 1933 – 1937 when unemployment was well into the double digit territory. Therefore, it is a worry for me, but history shows the stock market can move higher in the face of terrible economic conditions.
We continue to stress to take it stock by stock and day by day rather than taking a holistic view and making decisions. We aren’t in a market that is correcting. It is under pressure, the current rally is and we should be a bit cautious on new positions. With that said, it isn’t time to get too shy and completely stray away from the market. Early September acted very similar and the market was able to push higher. We simply do our best to react accordingly.
Keep those losses small.
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