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Futures Expose Market

Hey Market Pilot,

After a few weeks of lackluster activity and moves to the long side stalling, we are finally getting some action this week (even if it’s to the downside). I took the Moxie IndicatorTM members into cash last Friday since the longs I was in just kept melting down slowly and not holding the moving averages as they should have been.

There were a few other clues for me as well. One of them was the Short-Term Futures exchange-traded fund (UVXY) starting to move up and hold support. Then it was the Russell 2000 (IWM) continuing to find the daily 50 simple moving average (SMA) as strong resistance. Once these metrics started to show up, we got out of all longs and went to cash over the weekend.

Monday was a little crazy as we got a drop, but then the market absolutely ripped to new highs. This certainly didn’t make much sense and I was discussing the interplay between new highs in the S&P 500, but UVXY called its bluff. This was 100% spot on and we used that information to start going short on a few choice tickers.

We know this market is having a really difficult time staying down as far as the major indexes are concerned. But we also know that underneath the surface breadth is really poor and therefore I think the individual names we are trading short will persist as the indexes most likely chop around for a while.

Beware though, the poor breadth could be catching up to the indexes and this might be the beginning of a more significant weakness. Watch for the major indexes to make lower highs for a while. If they do, then watch for prices to keep breaking support. If you don’t like the short side, cash is a position.

Your Profit Pilot, TG

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