Four Day Sell-Off

My Swing Trading Approach

For a second straight day, I am entering the trading session 100% cash. I attempted to trade two stocks long yesterday, but quickly pulled out of them, once it became obvious that the market had no intention of rallying, following an intraday breakout. 

Indicators

  • Volatility Index (VIX) - Very little giveback yesterday, though a long upper candle that is usually synonymous with a sell-off in the volatility index. 
  • T2108 (% of stocks trading above their 40-day moving average): Bull flag in T2108 and holding up well, despite recent market weakness. A bullish divergence in the grand scheme of things. Currently rests at 32%. 
  • Moving averages (SPX): Trading below all major moving averages here. 

Sectors to Watch Today

Energy is likely setting up here, for at least, a dead cat bounce. It has established a record losing streak and is experiencing extreme oversold levels. A number of other sectors, such as FinancialsDiscretionary and Healthcare have textbook inverse head and shoulders patterns forming, while other sectors like Technology and Industrials have a variation of it.

My Market Sentiment

The volume in this four day sell-off has been weak. Well below average each day. The more I think about it, the more it seems to me that we are forming the right shoulder of an inverse head and shoulders pattern. Low volume on the right shoulder is typical. If this market really wanted to re-test the October lows, we'd be seeing much heavier volume levels pouring into this market. Besides oil, there isn't a ton of headline risk out there at this very moment. 

S&P 500 Technical Analysis

swing trading strategy report 327

Current Stock Trading Portfolio Balance

  • 100% Cash

Click here to download my Allocation Spreadsheet. Get all of my trades that I make real-time by jumping in the  more

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