Lots of encouragement in the market for the bears today. Several big name stocks fell below their respective longer term trendlines. as highlighted on the attached charts. That in itself does not mean it’s a bear market. My personal view is that trendline breaks are not nearly as significant as trendline breaks that are followed by a re-taking of the trendline. I am not suggesting that these trendlines will be re-taken this time. I am just saying that in my experience re-gaining the trendline, if it occurs, is a better signal than the initial trendline break. There is a good reason for this. Markets are constantly seeking liquidity and will often break a chart point in order to find that liquidity. Many of the best directional moves in the stock market start with a head fake around a chart point to get traders wrong footed, or stop them out of good positions. Again, I am not predicting this to happen, but I am certainly well aware that it could easily happen, and therefore I am not jumping on the bear bandwagon. I have dabbled long with ARKK, and it’s not paying me right now. I have December calls and will exit if the market doesn’t stabilize this week.
One thing going for the bears is we have a lower high in place from the 27th of July to the lower high on the 1st of September. That lower high is the first requirement to even think of the short side. It is in place so the bears have a chance. If the broad averages are going lower, the large cap leaders need to come under further pressure. The second tier stocks have already been beat up over the last 18 months or so. This means AAPL, AMZN, AMD, NVDA, TSLA, GOOG. I think it’s time for patience again. Otherwise one could just get whipsawed chasing bull trends then bear trends, neither of which go anywhere. I am watching closely for false breakdowns, other than that I am back to patience mode. The market only provides opportunities some of the time, not all of the time. That is why patience is the most important trading skill.