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It Pays to Be Picky

You don't have to run for the bunker, but you do need to be very selective on both the long and the short side in this market.


While winter storm “Rocky” barrels down on those of us that live in the southern plains, it seems rather fitting for this storm to be called Rocky as that would be a great word to sum up what I see happening throughout the remainder of the week. Any positive momentum we get early Monday morning should soon dissipate as I show you in the futures section of the video. Especially as we near the end of month, I am seeing some of the latest money flow models actually hit new 2013 year lows. So, aggressive selling should resume in rather short order and get worse as the week gets underway. I look at a few charts in this video to support that stance.

Video Transcript

Yeah, the U.S. dollar has been strong, but what did the euro do? The euro broke down. Remember when the market bottomed in June-July 2012? Like the euro, the market has been moving but guess what? It broke the uptrend line last week. Now, we’re seeing nothing more than a backtest, as I show you on the chart.

You can see the bearish divergence and see how the trend is actually down by looking at the chart in the video. You can see it’s just a countertrend move with it going down. That’s why it’s really, really hard for technicians to get behind this as being bullish because there’s nothing really bullish about it. It’s just a dead cat bounce, which kind of goes back to an analogy I like to use for this market.

Stand at the top of a set of stairs and throw a nickel down. Every time the nickel hits a step, guess what’s going to happen? It’s going to bounce, and it’s going to go lower the next time. Then it’s going to bounce before it goes lower the next stop. Then it’s going to bounce before it goes lower to the next step.

Now, do I think there are some stocks that will buck the trend, maybe the high-yielding stocks and certain things like that? While it definitely won’t be gold or silver, absolutely I think there will be some stocks that buck the trend. Do I think that everything is like Apple (NASDAQ:AAPL) in a full-blown bear market, or that everything is like the commodities, like U.S. Steel (NYSE:X) and Freeport McMoRan (NYSE:FCX)?

Or do I think the world is coming to an end and everyone needs to liquidate? No, I don’t actually think that at all. I just think we have to be very selective on longs and very, very picky when we choose to add to shorts, whether it be via puts or whether it be via inverse funds or whether it’s by flat-out shorting stocks because if you take a look at the broader averages, you’ll have every bull come out of the wood work and say, “But we’re only off a couple percent from the highs. I don’t see what the big deal is.”

It’s not really until you lift up the hood and you realize all of the technical damage in all of what used to lead this market.

InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the Open, Parabolic Options and Trending123.  For more information on which service is for you click here.

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