Friday’s lackluster performance following Thursday’s drop pins the tail on the donkey. Despite the market being oversold in the near-term doesn’t mean we can’t fall further. Price and volume have been on the side of the bears as of late. The bulls lack of response to Thursday’s action is quite telling there is very little institutional support for stocks. We have been highlighting this important development; the market needs institutional support to keep rallies going. With upside volume weak and downside volume heavy, it appears the market will break with volume.
On Thursday the QQQ broke through a key level for us triggering a long signal in SQQQ for our aggressive subscribers. The move triggered a short signal for the QQQ. We aren’t in the predicting business therefore we don’t put a price target on the potential trade. No one can predict the future and it is foolish to think you can.
The trend is your friend, ride it.
The fundamental analysis is fun to argue, but useless when trying to gauge where the market is heading. It is useful when determining leading stocks. IBD’s studies show a high flying stock always has a fundamental story behind the move. Look no further than NFLX amazing run since the March of 2009. The fundamental story of movie rentals and streaming video content is BIG. It lead to huge subscriber growth and great fundamental growth for NFLX. Powered with this knowledge it makes it easier to hold the stock as it pulls back. Know the story, but remember, fundamentals are for buying and not selling. Let the chart dictate where to get off the stock!
Thanksgiving week trading will usher in uber light volume for the entire week. It will be tough to really gauge too much from the week, but look for Europe to continue to dominate the headlines. Use the price and volume action of the market to guide you.
Cut your losses!