«It isn’t pretty, but Thursday could have been a washout.»

Traders,

You’re seeing historic things happen right now. The magnitude of the market decline is, in many instances, unprecedented. Thursday’s washout was one such example. I’ve come across loads of charts and data points illustrating how widespread the washout was. It doesn’t mean we can’t go lower, but it usually means we’ll get some reprieve from a momentum perspective. In other words, if we don’t get a strong snapback, the pace of the decline will at least slow.

What kinds of signals indicate short-term capitulation? One: a monster VIX spike to 35. Two: Extreme Breadth Readings (such as a plunge in the Advance/Decline line). Three: Extreme oversold readings (see Chart of the Day below). Four: Volume crescendo (though yesterday’s wasn’t as high as I would have liked). So far, stocks are rebounding Friday morning. Let’s hope the bounce sticks.

Video of the Day: What is Position Size in Trading

In this video, coach Gino Poore explains what position sizing in trading is and why it’s so important.

Chart of the Day: Percentage of Oversold Stocks

According to @bespokeinvest, 90% of all the stocks in the S&P 500 are trading at oversold levels (defined as 1+ standard deviation below the 50-day moving average).

Options Theory

Finding Straddles & Strangles

Here’s how to find straddle and strangle candidates.

Today’s line up

Traders Lounge 11 AM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

Cash Flow Club Replay

If you missed last night’s webinar with Coach Greg Holmes where he talked about The Current Market Climate or would like to watch it again, check it out here.

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.

Women in Trading MasterMind Group 8:30 PM EST

Once a month we’ll be hosting a live webinar featuring Women In Trading with Coach Emily. Get in the game!

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