Oversold, but not ripe yet

I’ve been gradually adding a few longs over the past few days as the markets continue to get oversold, but I have to admit that despite being fairly confident in a bounce soon, healthy charts are very few and far between. I scoured over 500 charts tonight and it really was slim pickings. I think its too late to be initiating shorts for my style of trade and the vast majority of stocks are below their 50-day moving averages. A few stocks like $LNKD and $LNG have held up, but they report earnings in a couple days. The coffee stocks like $GMCR and maybe $CBOU have been strong, but that trade is getting crowded already (and $CBOU also reports in a couple days). There are a few oil service stocks that look decent like $WNR, $APC or $SGY, but nothing to get crazy about.

The biggest reason has been the uncertainty surrounding the debt deal fiasco. The markets hate uncertainty more than anything, including bad news. Bad news can be priced in, but the unknown can be as frightening as a child’s worst guess at what lurks under their bed or in their closet. What this means for traders is that caution should trump the itch to bet on a market turnaround. Even if the markets do bounce in the next few days, the odds for a flush out first are probably better than your odds at a Casino. While it appears the worst is behind us in this debt deal nonsense, the markets showed very little strength today and futures are flat tonight. Until they show some semblance of strength, its best to keep your exposure to a minimum.

Good Trading,



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