Markets remain extremely weak and staged a hard reversal on Thursday after I noted that reversals were common the day after the Fed. I was glad to be in cash as the indexes closed down over 5% on the week.

This year’s leading sector is faltering; many energy stocks sold off on high volume as oil took a hit and institutions/investors look to raise cash anywhere they can. With no clear leading themes or sectors, a sparsity of chart setups, and the indexes at year-to-date lows, there’s not a whole lot to be done here. It’s still best to watch and wait for a better environment rather than get chopped up chasing pennies.

Many traders want to be involved in every single market move. The fact is that there are specific periods when the odds are stacked in our favor to make money. Now is not one of those times. The key is to recognize that, stay disciplined, and be ready to capitalize when things change. In the meantime, the most important thing to do is to limit risk and equity curve drawdowns.

Again, there are very, very few constructive chart setups to swing trade right now, but I’ll share a few updates below. Let’s get into it!

Index Update

The Nasdaq remains well below a falling 21EMA with net highs/lows now negative for the past five days, signaling strong caution on long positions.

The Nasdaq is down over 30% YTD. It’s below all declining key moving averages and the trend remains (very clearly) down. I don’t see any reason to be long here. I’m watching and waiting for a bottom to form.

The S&P-500 is down over 22% YTD and remains in a clear downtrend. Friday exhibited high volume without any progress lower, a development I’ll be watching this week as it could be a sign of “churning” which can indicate a bottom. Nonetheless, it has much more to prove before I get involved.

Stock Updates

No stocks from the last issue have hit their buy points.

Profrac Holding (PFHC) was setting up a bull-flag pattern off the IPO base but never hit the buy point and sold off on Friday along with many other oilers. Avoiding for now.

Best Setups

The setups below are ideas, not outright buys; placing a trade is discretionary and depends on both the price action and volume. To succeed, you’ll need to make the trade your own based on your rules for entering and taking profits, and always use a stop-loss!

There are no setups worth highlighting tonight. HDSN, FTCI, PLAB and STNG remain on my watchlist from the last issue, but they are not close to triggering buy points.

That’s all for tonight! See you back here on Wednesday night for an update on our stocks, when hopefully we will have more setups.

Cheers,

Danny Deals