If we had to describe the markets the last two days at this moment in time we’d have to say it’s — whipsawing If we had to define our stance we’d have to say we’re neutral until we can get a little more chart time to develop.
Yesterday in the micro charts the RUT 2000 and NASDAQ Comp. both traced out double bottoms and launched, the S&P 500 eeked into new low in short seller shake and bake headfake and came right back up. BUT that is in micro time frames.
One look at the micro charts also shows what COULD be the start of a consolidation between the blue lines on most indexes, chewing around to say the least. A rule of thumb us technicians like to use is: Strong markets consolidate at the highs and move higher, weak markets consolidate at the lows and move lower.
So keep that off to the side of your mind as we move forward in time. At this moment in time it’s just something to be aware of. Now keep in mind also that this doesn’t mean we are going to consolidate down here and roll over again as the other thing we want to watch for is that of carving out a low which is what a whipsaw range being built currently could also be. Remember for every seller there has to be a buyer and vice versa, sideways consolidations can be construed as bulls and bears evenly matched in a tug of war and they take place at highs and lows.
As we go through the markets looking for names we’re just not seeing too many that look really good here on the long or short side. That tells us we are in the twilight zone, where currently a lot just need more chart time to setup. This also makes us want to play it safe here with regards to any new positions. We’re more apt to work with what we have and lean towards scaling out of names when and where we can (preferably on strength). The best offense is a good defense. Of course we’ll take everything from this point forward one step at a time and make decisions along the way as more chart time information comes to us.