«Rallies are suspect.»

Traders,

Coach Tyler here. The vigorous market bounce has officially ended in a lower pivot high. While unfortunate, it’s not surprising. That’s what downtrends do! And it’s why chasing strength is dangerous. You’re effectively purchasing right in front of resistance if you buy after multiple up days in a downtrend. It’s not to say it can’t work. It is to say the odds are stacked against you. Besides, the risk vs. reward isn’t significant either.

If we’re lucky, stocks will chop around here as supply gets absorbed. If we’re unlucky, we’ll see prices fall back to last week’s lows. Either way, patience is required. I’ll echo yesterday’s comments on the VIX. As I write this midday Tuesday, the VIX has spiked to 35. Fear remains sticky, and demand for puts is still extremely high. I expect big swings, overnight gaps, and wicked intraday moves until that changes.

I continue to like fading extremes. That is, going bullish after multiple down days and potentially bearish after multiple up days. Absent that, I’d be highly selective for new positions.

Video of the Day: Gino’s Gems – How to know what stocks are in an ETF

In today’s Gino’s Gems, Coach Gino Poore teaches how to find the different stocks inside an ETF.

Chart of the Day: $SPY Lower Pivot High

The pattern of lower pivot highs remains uninterrupted this year. This needs to change if bulls are going to establish a foothold.

Today’s line up

Traders Lounge 11 AM EST

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The Coaches Show Replay

If you missed last night’s episode where Coaches Greg Holmes and Gino Poore talked about Multiple Timeframe Analysis or would like to watch it again, check it out here.

Halftime Report 12:30 PM EST

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Trading Justice 465: The Volatility Playbook

In this episode, Matt and Tim discuss the 5 key elements in a traders ‘volatility playbook’ that you can do right now to protect your portfolio. When markets start moving fast, and uncertainty arises, the degree of difficulty in trading also increases.

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