Vacation Time

Will be back on Monday. 

Market has no surprize

Market is doing exactly what you would expect it to do in a range. Volatile moves is characteristic of range bound action.

Earnings season will determine next move for the market. If earnings stat deteriorating or guidance starts going down then the range will break to downside. If earnings surprise then we will have rally.

Any move out of this range will be big move. However many will deplete the account playing the range and suffering death by thousand cuts.

Back to range

Buyers lack conviction. sellers lack conviction. End result range bound action.

Individual stock action does not show lot of setups for intermediate term swing trades. 3 to 4 days weak bounces and rally failures is what you will find in most cases. It continues to be day traders market. However next earning season is fast approaching and that will likely offer some good trade opportunities. 

Remain in capital protection mode

Range is being tested currently. While short term bounce is possible, a break below range will be good for longer term bottom formation.

The rush to buy every dip is not a sign of capitulation. Capitulation kind selling leads to sustainable bounces. Capitulation, fear , and extreme bearish sentiments is what will lead to bottom. 

If you are intermediate swing trader , being on sideline is your best strategy. A bounce will setup more shorts in few days.

PCYC is the best looking long setup out of over 1000 stocks I looked at today.

Remain in capital protection mode.

Not surprised by the drop

Throughout the range bound action, the breadth remained firmly in negative territory. Which indicated that the bounce had no broad based support. Market bottoms are characterized by breadth turning positive. The Stockbee Market Monitor Timing model never signaled a market turn.

As they say the key to profitable trading is to play great defense and avoid certain periods. Market breadth allows you to do that. It helps you avoid the risky periods and concentrate your buying power during safe periods.

Related posts:

How to use market breadth to avoid market crashes

Why book on market breadth retails for $450

How focusing on methods help

Nasdaq 100 is leading

As of now the best performing index is Nasdaq 100. Russell 2000 is laggard.

A handful of stocks from Nasdaq 100 are attracting buy interest while the smaller cap are languishing.

These are the top 30 rated stocks by momentum in Nasdaq 100. Many had breakouts yesterday. 

Range in play

The market is near top of the range. It had trouble breaking out of range last time. We will see if this time it manages to break it.

The breadth has improved a bit but not yet in bullish crossover mode.

Time to keep an eye on new leadership. Stocks that are outperforming the market during this range bound market or are holding up well are the stocks likely to lead next phase.

ATHN
CALP
CIIC
EXK
GKK
GLBL
GNK
GRO
LPHI
LQDT
MELA
MITK
MMI
NETL
NXG
OPTR
PANL
PRKR
PSMT
RIC
SPRD
STAA
STMP
TMF
TVIX
VGZ
VIXY
VRUS
VXX
WPRT

Unless breadth deteriorates significantly, we will continue to be in range bound mode. Mosdt moves will be of smaller magnitude till range breaks. 

Ingredients are lining up for a sustainable move

Market is stuck in a range. Moves on both bullish and bearish side have lasted for 3 to 4 days. Will this time be different.

More time market spends in this range the better it will be. That will ensure the next leg up or down is big.

The sentiments are now starting to favor bullish case.

For the first time you see sentiments flipping to bearish in recent weeks on the Investors Intelligence polls.

Ingredients are lining up for a sustainable move, but the volatility is too high and as of now only handful of leadership stocks have started showing up. It is still news driven whipsaw action.  

Some signs of stabilization

The market is attempting a botom formation here. After the big down move, selling has not been severe and every time there was selling buyers are stepping in.

More stocks are going in to sideways bases. From such bases a new bull move can start. If the market spends more time going sideways, it will be better. As of now it looks like a good setup for last quarter rally. The momentum scans have started showing some good setups. That universe should expand if the market puts in a bottom here.

But it still remains very volatile market. The volatility has to drop for meaningful bottom.

Number of stocks forming constructive bases

c
Market had a vertical drop from last week of July to around first week of August. In 11 days market lost between 12  to 20% on key Indices. This was the sharpest drop in 11 days in 40 year history.

Since then the market has stabilized and form a range for last 5 to 6 week. The range has been very volatile with 2% plus moves on daily basis.

The low established during the correction has held and as of now we are witnessing breadth divergences. Fresh selling has been on lower breadth. Fresh selling has not had major follow through.

During the first phase of selling most stocks followed the market and had vertical drops. But now in last 4 to 6 weeks some are resisting fresh selling and forming constructive bases. Number of stocks have started to show signs of building compact bases. These stocks are likely to be leaders of next move.

If you run momentum scans currently and look at top 300 stocks by momentum you would see many signs of stocks settling in sideways bases and resisting further selling.  These are the stock to focus on for any up move. Some stocks have had recent breakout and follow through which is also a good sign. Time to start building a buy list and be ready.

Any breadth thrust here will see many of these stocks breaking out to the upside. If the range breaks to the downside then all bets are off.

But as of now a short term bullish patterns are in play.

Volatility is the name of the game

Market continues its volatile move in a range. The range has not yet broken. Expect more of the same for sometime.

Breadth trends are negative. There was a brief bounce in breadth trends some weeks ago but that has now been negated. At some stage the breadth will flip and that will be powerful signal.

Volatile range

A nine day look at the index shows nothing much has  happened in 9 days. It is a chopfest.

Key is follow through

Big breadth day on positive side . Key is follow through. We have not seen follow through beyond 3 or 4 days on positive side in last many weeks.

Unless trading on very small time frames you can get whipsawed to death. Volatile periods are followed by better trading periods that last for months, but for that patience is needed. 

Large swings of 1 to 2 % daily

Market continues to form range hear. The breadth trends continue to improve compared to August.

Volatile market with large swings of 1 to 2 % daily on either side is the current situation. To trade it you need to have intra day time frames. For swing trades on momentum stocks there are hardly any setups. 

Recent lows may get tested

Recent lows may get tested. Unless they break this is still a range bound action near recent lows.

V reversals are rare and this market is acting in line with that historical trend. A churning action at this level would be a better setup as it would allow stocks to form sideways patterns. 

Stocks up 25% in a month

Very small number of stocks are showing momentum leadership currently. Z, LPHi, GNK, MAKO, STAA, FXCM, SUSS, RIMM, LOGI, RIC, and PANL are true leaders of the move that are up 25% plus in month.