Market Poised To Go Lower

Stock market is in serious trouble. What looked like a follow through day turned out to be a bear trap. Yesterday I though my patience will be rewarded after all. For more than a month I've been patiently sitting on cash, waiting for opportunity. Yesterday I thought I finally got it, but I got a hunch that I should not do any buying anyway. Let me explain why.

First, despite a nice up day, on intraday basis market actually made a double top. Price fell immediately after gap up on open. It recovered until the end of the day, but the fact that people were selling into the gap is a clear message what's on their mind.

Second, a real follow through day should be accompanied by a number of high quality names breaking out into new highs on volume. My scan yesterday found only four names I was willing to put on my watch list - not a number I would expect on a follow through day. Most of the names in my scanner were laggard stocks rallying into resistance.


Anyway, I think the market will have to go much lower before big money is willing to step in again. From now on, until conditions change, I'll be focusing on shorts. Another wedging rally into resistance could be an opportunity to make some quick bucks. It is also an opportunity to unload any remaining longs, if anyone still has them. If we don't get a wedging rally, positions could be held, but I suggest tightening up stops. And I would certainly not do any buying until a real follow through day is printed.

Good luck