Tuesday, August 06, 2013

Stocks Pull back in Fast Trade

Let the top calling begin as the stocks pull back in heavier volume. Today’s pull back wasn’t too severe and part of a normal reaction to the market hitting new highs. What we’ll want to avoid seeing for this uptrend to fail is a string of distribution days strung together. At this point, we really do not have enough evidence to suggest “calling a top” here is justified. Although, it will not stop folks from trying to be a hero and call a stock market top. Our process does not include calling market tops, but one that relies on price action giving us a high probability entries and exits. Until such time we get enough price evidence we’ll stick with this uptrend. We aren’t trying to be heroes in this market. Many tried to be in May when we had the nasty high volume reversal on the 22nd. May’s high did market a short-term top, but it wasn’t a major market top like many are hoping for. Even a 10% decline from previous highs wouldn’t signify a big market top. Do not get wrapped up in the hype of where the market is going or where it has been. All we know is what we have now and trying to guess what will be will only lead down a path of pain. For the most part many leaders pulled back in normal fashion. Not much to worry about from that angle at this point in time. Distribution days are a part of EVERY market uptrend and are expected. The S&P 500 has 4 distribution days, but today is the only one where it was on the real negative side. If this market has topped we’ll get a few more distribution days and they will be more severe today. This is what we’ll be looking for and will adjust accordingly. The most important thing to remember in this market is to follow your investment process. Deviating from your plan by going rogue or being a hero will destroy your trading. Cut your losses.

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