#TrendTrading – short but whipsawing?

UPDATE (12/31:

For the last day of the trading year, the market followed through on short breadth signal without a price whipsaw.  As a result, on the day trade, the 3x-leveraged inverse index ETFs, SQQQ, netted 3% from the open to close; TZA, 1.5%; SPXS, 1.53%; and UVXY, the big winner (as often is the case), 5.8% for the day.

As a side note, TNA gave an scalp buy on the open that was stopped out for a 1.1% loss.

TREND TRADE: Short (or flat) from open, 12/29.

SWING TRADE: Flat from open, 12/30.

DAY/SCALP TRADE: Selling the bounce…

PRICE TREND: Down 3 days.


Today’s market action was mostly flat after Wednesday’s hard reversal to the downside.

So what now?

Tricky territory.  Possible the chop today was digesting a drop that was too far too fast. a pause in a word before more the slide down resumes tomorrow but the recent rally was so fast to the upside there is a chance it’s going to take more than one-day’s hemorrhage to kill the bull.

Yesterday’s sudden slam turned the longer-term breadth trend negative but short-term breadth turned up today so there are cross currents in play.

As often happens at the end of a move, the recent up move in this case, by the time it is clear it could be reversing, there is much at is oversold and could easily bounce to confound the change of trend.  If I had to guess I would guess the market bounces before any more significant downside.

That is a guess based, most notably because SPY (the S&P500 ETF), which topped on 12/13 and has now managed to pull back for nearly two weeks into oversold territory. Also, more than 40 of the stocks on my nifty-fifty stock list have been on sells now for two days – that is almost always the bottom or the beginning of the bottom of a swing (I say almost because when it isn’t it is because the market has suddenly turned into a hard downtrend, like in 2008).

Market followed through on short breadth signal:

(right click on chart for a larger view)


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