Sunday, October 14, 2018

A brutal week for stocks and the indexes with some of the worst selling we have seen in recent years. This sharp breakdown damaged most charts though if you heeded the warnings here over the last several weeks, you would have followed me in holding 70% - 80% cash during this sharp break in the market. Cash continues to be my Number One position with the addition of a few high yield REITS.

Last week ended with several signs of exhaustion including the (10:1) downside volume on Thursday which means volume was 10 times greater to the downside than to the upside as traders panicked out of positions. This behavior very often leads to market bottoms.

Letís get to some charts with a review of the leading indexes.

TBA = Technical Buy Area

My short-term trading oscillator closed at -70 on Friday which is very deeply oversold and implies a bounce could develop soon though most charts need more time to rebuild.

Now letís look at some momentum stocks starting with cannabis names. With Canada legalizing recreational marijuana on Wednesday, cannabis stocks have moved up based on this widely anticipated news. No telling if these stocks start to sell off once enacted so Iíll keep my stops in place just in case.

While Chinese stocks have sold sharply lower in the recent trade war, letís review two that are starting to show some improvement.

I look forward to seeing you in the chat room tomorrow for active trading and then back here tomorrow night for an update on the charts.

Daniel J. Zanger