This will be a short post since I covered my thoughts going into this week in my post yesterday. I do want to update my thinking after seeing the futures trading. In overnight trading, the market slid out of consolidation but has bounced back as we approach the open.
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Today’s Scenarios
Rollover and sell-off
The bounce into the open actually makes it more likely that bigger selling will hit. On big gap downs, shorts will cover and opportunistic speculators will look to buy the open - “oops reversal.” On narrow open shorts are less interested in taking profits and talented speculators won’t buy interday dips- things could escalate.
Big bounce -We are in a headline-driven market. There’s a risk that a positive development in the Russia / Ukraine situation triggers buying.
Range day - in the big picture, the market structure is not conducive for the indexes to simply rip above the 21 ema and keep going.— They need to compress first — that takes time and many inside days.
GAME PLAN
We talked about the industry groups that were working in the weekend’s post. If we get a setup in those stocks, they take the shot and manage risk. Don’t be a hero and try to find bottoms in growth names.
In tough environments, It is more important to preserve capital than to make money.
Cheers,
My Reading List
I’m an avid reader and always have a book (or several) that I’m reading.
Currently, I’m reading “Mastering Market Timing” It is providing a nice overview of Wykoff’s and Lowery’s analysis techniques and covers major market tops and bottoms.
I worked through the 2009 bottom. These types of exercises help train out trading brains. I’d invite you all to try it.
I am very grateful for your posts each morning. They are very insightful! Not only I get to learn how speculators think but it also helps me calibrate every morning. Thanks!