One good option in such an environment is to not trade. Today I sold a number of put positions, in case we make a break higher, leaving myself mostly in cash. Looking at the 60 day chart of SPY, we can see that price is approaching a moment to truth: do we definitively break the downtrend line, and move higher, or else make a clean break below the 84.00 level, to test the November lows?
In any case, it is a very difficult market to trade, regardless of time frame. At this point, I am waiting for a more clear direction, and also more volume.
The dollar has risen during the past few sessions, and is still trading in a range.
Oil closed at a new low on increasing volume.
Commodities are still headed lower.
Yet, the bulls were strong today. When I look at a chart like IYR, I am deeply puzzled. I have puts, and I am not liking the volume patterns. I can shake my fist and yell "fools!" at my computer monitor, but nonetheless, someone wants to buy REITs here. We'll see how long that lasts.
- JEC looks good for the long side.
- DFS: I still have puts on this one.
For now I am focused on protecting capital, and waiting for a clearer direction.
