Current Market Conditions

Over the last few days the overall complexion of the market has seemed to change a bit.  The price action has seemed heavy with some very strong down moves in previously strong stocks and sectors. 

Now obviously I’m no expert on where the market is going.  For all I know the market may keep grinding higher and we could have a continued move to the upside.  But in my eyes the market seems to be entering an indecision/distribution phase.   This does not mean I am changing my long bias in the market, but I will begin to nibble on the short side more and more.  Looking at some sector performance, if we start to pullback a bit I may look to start some short positions in the financial sector as then have shown some weakness across the board.  This weakness may be caused by the unknown about what is going to happen with the financial regulation bill, but that is where the complexion of this market is changing.  Over the past year this market has shrugged off any bad news, now the bad news seems to be sticking and the selloffs are very aggressive.  The stocks in the financial sector that I am looking at are JP Morgan(JPM) and Morgan Stanley(MS).  There is a lot of support levels to get through so I will be initiating any of these trades to the short side with lower share size and expectations will be lower for the time being. 

Another sector that I am looking at if the market gets weak is a sector that has already been weak for the past year.  It is the agricultural chemical sector.  The stocks that I’m personally looking at are Mosaic(MOS), Agrium(AGU), and Monsanto(MON).  All of these stocks are in downtrends already so you have to believe that if the market starts a downtrend the momentum to the downside should increase. 

Even though it is very easy to say we have hit a “top”,we have to keep a bigger picture idea of where we are in the market.  We have been up for basically the last year with only small bumps in the road.  A pullback would not be entirely unexpected.  Even if we do pullback we are still in a bull market.  As intraday traders we have the flexibility to take advantage of any trend that the market gives us, but you need to trade with caution during these indecision phases.  Even though the market has started to feel different it is not a guarantee.  The only difference I will be making in my game planning is to include a few more short scenarios but I will still wait for the market to tip its hand.  Best of luck with your trading. 

Kyle

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