MONDAY
After a day or two, however, I would not be surprised if the move runs out of gas and the final test toward the February low is on.
The leadership looks good and it could lead the market higher. What likely happens as the
market sells again to test the prior low, and during that time these stocks can hold up and be ready for the bounce.
Friday was interesting, a solid short covering move. The next point of note is how stocks open Monday. A bounce and we see how it holds, for the day or more.
A bounce can turn into something really solid given how many quality stocks there are in good patterns, but it has to prove it.
For those stocks that bounce but are lagging, using the move higher to exit is not a bad strategy.
The probabilities are that the market is not through the selling episode yet. A bounce could turn to a new high but likely stalls out and then makes that second drop that usually puts an end to a selloff . . . IF the economy is still solid, if the Fed is not on the path to wreck it, if war does not erupt, if the trade issues don't explode.
A few ifs, but for now we play the market that has the most probabilities, and that is a test to the prior lows. The more immediate question is whether the market can make more upside than just the Friday move before it stalls and falls.
The reason is this is a tumultuous time in the market. Trends are in flux and thus moves are for most stocks shorter term. That is why while we have positions, we don't have a lot of money in the market right now. Too easy to get whipsawed.
When the break lower occurs, if it does, sure we want to play that downside short term. Then when a new move starts, if there are very good patterns to play, that is a time to put more money in.
If the move lower does not come, we play leaders upside, and if more and more join in and the market breaks out, we put more money to work.
Source: Investment House