Panic Overwhelms the Market

Well my friends, panic seems to have set in. I sense there is something different about today’s decline. Over the past couple of weeks, dips have been met by underlying strength, and the general mood was that they were to be bought. No fear whatsoever. That’s not the case today. Buyers were not willing to stop the pain. There were a few feeble attempts, but they were easily thwarted by sellers.

We all know panic is the best time to buy. However, it’s tough to allow the brain to overcome emotion. Not to mention it’s tough to time a bottom or bounce. Buying during a panic not only requires courage to place the trade, but also the patience to stick with it (note that to make the trade you must measure risk, positions size and set a logical stop).

Panic is just one of the current bounce signals. The second is seasonality. The week before Thanksgiving tends to be positive, as does the entire holiday season in general.

Another positive is the T2108 indicator, which measures stocks above their 40 day moving average. It is back in oversold territory. Last week, when the indicator first reached oversold levels, I talked of playing for the second bounce. As I predicted, the first bounce failed and we are back at about the same levels as the time of the post. It looks like a nice spot to play some longs.

I placed three long trades today. As noted earlier, I bought MA at $181.04. The stock has one of the better looking charts you’ll find. A nice breakout after earnings that has held up well during recent market turmoil.

I also bought QLD at $99.63 and XOM at $84.20.

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