Expect the choppiness to continue

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S&P500 daily at 1:22 EDT

MARKET BEHAVIOR
Stocks slipped in early trade, but they found support at 1755 and recovered a large chunk of the losses by midday.  The market continues trading between 1750 to 1770 as it consolidates recent gains.

MARKET SENTIMENT
We are stuck in this range above 1750 since few are willing to sell their winning positions while others are afraid to buy near all-time highs.  This standoff will continue until we either run out of the modest number of buyers necessary to offset the normal churn in ownership, or we hold these levels long enough that prospective buyers feel more comfortable wading in.  Either way, expect the resulting sideways trade to remain choppy with failed breakouts and breakdowns as the market takes time to build critical mass for the next directional move.

TRADING OPPORTUNITIES
Expected Outcome:
This is a tough place to own stocks since these head-fakes higher and lower tempt us to act impulsively.  This price-action is better suited for day-traders that can respond to the intraday swings, or long-term traders that ride it out.  Swing-trading choppy markets is difficult because it gives off so many false signals.  Over the near-term, we are best suited buying weakness and selling strength over short periods of time.  Think of it like day-trading over 48 or 72 hours.

Over the next couple months, expect the market to drift higher into year-end barring any headline driven crisis.  Underweight money managers will need to stuff their portfolios with the right stocks before they close their books for the year.  That will keep a bid under the best performing stocks.

Alternate Outcome:
I am concerned about the lack of fear in the market.  While I don’t expect a bear market any time soon, we could see a swift move lower if the market starts obsessing about a new risk factor not already priced in.  The problem with unknown unknowns is we don’t know anything about them and it will catch most everyone off guard.  Hopefully by paying attention, we will respond before everyone else.

Trading Plan:
This market is best suited for day-traders or long-term investors.  The failed breakouts and breakdowns make it hard for intermediate traders.  If anyone must trade the market, trade the range by buying the dip and selling the rebound.

TSLA daily at 1:23 EDT

INDIVIDUAL STOCKS
A lot of volatility in TSLA ahead of its earnings.  Unless trading earnings is your thing, it is best to stay away from this for a day or two.  If Musk found the cure for cancer, then it is an easy buy after earnings.  Anything else and we will have a hard time pushing past $200.  Most, including Musk, recognize this stock is way ahead of itself.  While the “next greater fool” thing works great for a while, it always comes to an end and everyone in this name needs to have an exit plan so they don’t get left holding the bag.

BBRY is a dead man walking.  It really feels like the company could not find a buyer at any price.  That doesn’t bode well for anyone holding the stock in anticipation of an acquisition.   With MSFT taking NOK, it is hard to see another natural fit for someone else in the tech space looking to break into this market.  Unfortunately for many optimists, BBRY still looks like a long-term short.  In the near-term, a gambler could play for a bounce back up to $7.50.

GLD struggles to find a home as fears of contagion, inflation, and all the other justifications for stockpiling gold evaporate.  Over the next couple years it will probably slip into triple digits.  While some claim everyone should hold some gold in their portfolio, I’m far more partial to things that increase in value.

Plan your trade, trade your plan