When prices failed to follow through on the post-election relief rally, sellers regained full control today.
On days like this, I become so focused on price action that I purposefully ignore almost everything else. I have no idea why stocks fell today or what narratives the financial media is using to explain the decline. I plan to catch up on those developments when time permits this weekend.
For now, my priorities are straightforward.
My first priority is managing my stops to protect capital.
My second priority is watching for signs of improving price action across the market, my watchlist, and my intraday screens that might suggest sellers are beginning to lose control.
With that in mind, I have two important updates to share tonight.
1) I’m now 100% in cash in my actively managed trading portfolio.
The sustained weakness has triggered all my remaining secondary trailing stops. These were the stops protecting the second half of positions that had not already been stopped out in mid-October or afterward.
As a result, every remaining position has been sold.
2) There were very few encouraging signs of price action improvement today.
The most constructive observation I can offer is that a considerable amount of today’s selling appeared to be forced liquidation, particularly in leveraged positions.
When leveraged speculators are forced out of the market, the potential for new opportunities increases. However, forced selling alone is not a buy signal. We need to remain patient until price action begins to cooperate again.
When this morning’s opening rally was sold and prices continued falling despite filling yesterday’s post-election gaps, it provided the first of several warnings that more serious trouble was developing.
Just as importantly, I saw little evidence that prices were beginning to find and respect established support levels.
Now, let’s turn to the charts.