With market instability showing up in multiple areas there are signs the market could be fading. As I pointed out in the prior newsletter, the Russell 2000 was up 20.1% since the election as of Friday. Many other small cap stocks are up 30% or even 40% since the election. There is going to be a price to pay and it is not going to be pretty.
Most of the desirable small cap stocks in my research universe have charts that look like this. Buying these charts today would be suicide. At the same time we cannot afford to short them either because there are 13 trading days left in 2016 and they could still go up. We successfully entered the put position on the IWM at the open this morning and that will be our play on a declining market.
There is no reason to enter new positions just because this is a newsletter day. I scanned about 350 stocks today and there was nothing with a risk-reward ratio that warranted adding them as a new position. We do not know which way the market is going but the odds are good it will decline sharply over the next four weeks. I fully expect to be stopped out of more positions in the days ahead as the market turns choppy ahead of the holidays. I do not want to keep adding positions just so we can be stopped out. I will continue to do my scans and it something pops up worth playing I will definitely add it. Today is not one of those days.
NEW BULLISH Plays
No New Bullish Plays
NEW BEARISH Plays
No New Bearish Plays