≈ You remember what a downtrend looks like, right? ≈
It’s getting nasty out there. Trends are turning lower, and support levels are giving way. Last week’s retracement got rejected mightily, and it appears the correction is here to stay for a spell.
Take a deep breath and embrace it.
Once upon a time, I would have fought this all the way down. Every red session would weigh on my soul. And then, when it finally ended, I’d be too exhausted to capitalize when a new bull was born.
But eventually, I evolved. Now, I’m quicker to reduce risk and keep my sizing in check for active trades. And I’ll sell calls on long-term stock positions until the storm blows itself out. In times like these, it’s also worthwhile to dust off the bear playbook and refresh our memory of how to profit when stocks puke.
Rather than guessing how long this downtrend will last or how far it will ultimately fall, I suggest keeping it simple. The path of least resistance has officially shifted from higher to lower on the daily time frame. Selling rips is the new buying dips until proven otherwise.
Chart of the Day
S&P 500: Evolution of a Rollover
The S&P 500’s price action is instructive on how trends reverse. First, distribution cropped up. Next, we broke the 50-day moving average. Then the low-volume oversold bounce got rejected, forming a lower pivot high. Finally, we sold off again amid surging volume to yet another lower low.
Video of the day
Focus on Fundamentals: Price to Sales (P/S) Explained
In this Focus on Fundamentals clip from Thursday’s Halftime Report Coach Greg explains what a Price to Sales Ratio (P/S) ratio is and how traders and investors can use this important fundamental concept.
Today’s line up
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Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
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