The belief that we are going to hit a bottom here is wrong in my opinion, but because I trade both sides of the market direction it really does not matter. Some strategies for today when we are probably going to see a big drop in the morning and then an attempt to bounce back.
Market Direction Portfolio
For investors following the market direction portfolio, you can read what I am doing through this link. Overall I will at some point add to my position on the DXD as the market direction tries to recover at some point either today or Monday.
Market Direction At The Open
The big drop this morning brought the S&P back to the 50 day simple moving average (SMA). This should create a bounce back sometime today. Momentum is pushing lower, MACD is turning more negative, the ultimate oscillator is now negative. The Rate Of Change has now turned negative indicating more selling than buying. This is flashing a signal to investors to be careful of any bounce. If I were to buy stocks here, I would be selling in the bounce.
The Fast Stochastic is deeply oversold just after two days of selling. This will most likely lead to a jump in the market direction back to up before more selling comes in.
Capital Preservation First – Profit Second
Finally to once more memntion my comment from another article:
Remember in a market like present, capital preservation is the priority. The profit earned is secondary to the risk to capital. At the end of a tumultuous year you want to look back on your trades and see how much capital was never at risk and then how much your return was. I aim for 12% each and every year. Any return above that I consider a terrific gain, but preserving my capital is the most important aspect of my investing.
Therefore it is important to take my time selling puts and making trades. I take smaller positions and look for dips that are too big on my favorite stocks. Those are the trades I am looking for.
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