Market Analysis- Sun, Mar. 3rd, 2013
We gapped down on Friday but the market slowly trended up all day, showing no signs of weakness. I pointed out the possible inverse head and shoulders pattern the day before and that’s how I approached the day with my IWM short. I covered 75% of my position within the first 30 minutes of the open and covered the remaining 25% throughout the day.
Volatility is picking up and I don’t want to be caught up in this whipsaw. I don’t mind waiting patiently until the next trend begins. I don’t know where we’re going exactly or when. I am anticipating another uptrend but I won’t be pulling the trigger early. Moved to 98% cash to end the week and now focus will be primarily shifted to strong individual stocks for faster trades (hold period likely only a couple days).
Keep an eye on bonds, TLT. Volatility has been consistently decreasing since June 2012. RSI has been <70 since September, both signs of weakness (and strength for stocks). Watch to see if volatility and relative strength begin to pick up, which should be a leading sign for how the equities will end up.