The surprisingly weak jobs number on Friday really spooked the bulls and rallied the bears from their slumbers. The markets gapped down and printed a trend-down day...until the last hour of trading when it seemed like the bears decided to get an early start on the weekend, allowing the bulls to scoop up bargain shares. We can expect more of this bull-bear battle in the days ahead as the markets look for a local low to consolidate the recent sharp run up off the August capitulation low.
Alan Farley on his website, hardrightedge.com (Farley wrote the foreward to our forthcoming book, by the way), said this about the current market condition: "Market players don't know whether to bet on a slowing economy, or the benefits of lower interest rates. This conflict is creating a manic-depressive environment, in which bull and bears pass around the leadership mantle like a hot potato."
We agree: in short, look for more volatility ahead....but there is some good news ahead for trend traders like us! The internal indicators we use to measure the overall health of markets (NASI, Adv/Decl, TRIN, etc.) hit multi-year lows last week. Over the past 10 years, anyone shorting the indices at these levels has lost money every time. Thus our plan is to sit tight on our open longs with stops in place (just in case the bears get a little too headstrong), and continue to look for the best charts with upside room. As it looks now, if we can get past the next week or two's volatility, we should be nicely poised to catch the next bullish leg up into the end of the year.
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