Sell-Off In The Market

My Swing Trading Approach

I continue to book profits in trades along the way, where it makes sense. Yesterday, I closed out my trade in Twitter (TWTRfor a solid +4.7% profit following a candle and lack of breakout that was less than desirable. Nonetheless, I managed the profits and made a good trade out of it. I am up for adding 1-2 new positions today, should the market show itself capable continuing with the rally. 

Indicators

  • Volatility Index (VIX) - Small pop yesterday back up to 12.41 from 12.25. There is a chance just looking at the recent consolidation, where it could be setting up for a pop higher. Has this elongated bull flag pattern over the last two weeks.   
  • T2108 (% of stocks trading above their 40-day moving average): Breadth was not ideal for the bulls yesterday, and it was reflected in T2108 which managed to decline for the entire session, closing near its lows at a 5.1% decline at 58%. Watch this development to see whether the market continues to struggle with breadth. If so, may be a sign to curb positions. 
  • Moving averages (SPX): Broke below the 5-day moving average yesterday .

Sectors to Watch Today

Only one sector finished higher on the day and that was Technology as the sector broke out of a triangle pattern. Healthcare pulled back yesterday, but remains the strongest of the sectors for now. Staples and Utilities continues to weaken of late. Telecom had a very hard pullback yesterday which throws into question the overall rally of the sector. Continue to stay away from Materials and Energy - both very bad sectors for your cash. 

My Market Sentiment

The sell-off in the market was a lot worse under the surface than what the market will show. Breadth was poor, and outside of tech, all the sectors traded lower. I don't think the rally is over, but always be prepared for an alternative outcome versus what is expected. 

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