It’s been a while since we’ve seen selling 3 days in a row or selling period. The markets have been knocked on the head by the Fed hammer. The fear, of course, is that QE will “for real” get wrapped up later this year. This would remove a substantial buyer from the bond market, sending interest rates higher, and suddenly stocks don’t look so attractive anymore.
For now, the daily charts on the stock market are all still in strong uptrends, and we’ve been down this road before where we see a couple of days of selling followed by another miraculous rally. So the jury is still out. To say this market is really ready for a downtrend that could last, say, weeks, is the understatement of 2013.
The question is – will it last? For today, I’m not looking to be aggressive “buying dips” into the close. And I’ve been burned getting too excited about the short side already this year. So what to do? Stay nimble. Don’t get too excited either way. Keep your emotions in check. Look for stocks that don’t care what the general market is doing. Tesla (TSLA) is a great momentum stock. Simpler Options members have already done well with this one last week and the 85 call options that expire next week that we bought yesterday for $5.80 is doing well. I like TSLA going into next week so I’d add to that position on any pull back.
Going into Memorial Day weekend the markets will digest the news and the selloff. Tuesday will be telling. If the Bulls don’t make a strong showing right out of the gate look for the highs of this week to be a short term high and any rallies a shorting opportunity. Good Trading,