I don’t try and guess what the market is going to do. I believe in having a plan for what might happen and then reacting to what’s going on in the now moment. I used to try and predict what the market would do and load up on stocks in an attempt to position myself for a big move. Wrong move. What’s worse is it took me many times before I figured out that trying to guess tops and bottoms isn’t a profitable strategy.

When I look at today’s market I get a lot of mixed signals. My bullish scans aren’t yielding many breakouts which leads me to believe that earnings aren’t being well received. In earning seasons past, a fair amount of stocks reacted extremely positively after announcing their earnings results or guidance, and these stocks normally outperformed the market that quarter. Stocks that have faired well this earnings season are CIR and RBN.

It seems like the majority of stocks that are showing up on my scans are low volume stocks that don’t give me confidence that this rally is going to have legs. On the flip-side my bearish Lemmings scan hasn’t yielded a result since July 14 so I haven’t seen many opportunities to the downside either. Markets like this cause investors like myself to do extra work preparing a bullish and bearish trading plan because the market can really go either way.

The main reason this market is rallying is because oil has been dropping (which is no surprise given how high it’s move up without a proper correction) and the markets were quite oversold by historical measure. I could see oil dropping a tad further, possibly to it’s 20wk ema as shown above, before continuing it’s ascent to new highs. Further weakness in oil could propel the Dow a little further, but I only see this as a tradeable rally versus a major turning point. Even though I’m bearish as to where I feel the markets are heading, my indicators are telling me it’s safe to begin nibbling on some long positions which is what I did at the end of the week. I read somewhere that if a trade makes you uncomfortable then it’s probably going to be profitable. It’s when you put on a trade and you feel that there’s no way you can lose money, that you have to worry. Right now I’m uncomfortable holding my long positions.