Yesterday's trading stuck it to the shorts early in the day, felt like a bull trap by mid afternoon and then left everyone guessing at the close.
The S&P 500 and Nasdaq are millimeters away from experiencing a golden cross where the 50-day average crosses up over the 200-day average. This is very bullish moving forward. Yet trading over the past week has been extremely choppy and the dollar is still stabilizing making the near term outlook iffy at best.
We have no confidence in either side of the trade here. Most of our short positions stopped out in early trading yesterday, including RINO, which we had a lot of confidence in. If we had to guess, and we pretty much have no choice in the matter, trading is likely to remain choppy as earnings roll out over the next couple of weeks and as the dollar works off its oversold condition by staying range bound or by turning up into its falling 50-day average.
If the dollar does rally into its 50-day average then stock prices are most likely going to correct. If it stays range bound near current levels, then stock prices will most likely also be range bound working off overbought conditions in a tight, but choppy range. The later is the most bullish scenario for stocks moving forward as it would indicate smart money is unwilling to take profit at these levels. However, it will also make finding profitable short term trades very difficult over the next week or two.
Today we are going to take to the sidelines as we just don't see many reliable trade set ups on either side. If we get a breakout failure with the Dow today, we will likely put back our DXD trade that stopped out on Monday, but right now that and everything else is just a big "if".