I know you have been getting tired of me saying it’s not a good time to be buying longs. I know because I’ve been tired of saying it. Too many wishy-washy moves. Too much of the market just in low-volume “no man’s land.” This activity is prone to slight upside with massive downside risks due to light trading on the way up and no buyers left on the way down. Too weak of breadth. Too many stocks still in long term downtrends. Well, all of those days of worrying about missing out on small gains are now a thing of the past. You see? That’s the problem with markets – the large moves are what matters in making or breaking portfolios. Nothing in between. You’re right, my timing was off, but the results of what I was seeing (weakening breadth, individual stocks breaking down, strengthening in VIX the last few weeks) came to fruition. Signs of weakness always end up being right.
All the time that we have waited was littered with opportunities to make short term trades using the ultra short term indicator. It has been incredibly accurate as of late for identifying buy points. But as you notice in the chart there are times when it reaches oversold levels and stays there for some time – those are the times it doesn’t work.
Ultra short term – back to oversold just like that. Note that unlike the last three months, this may be a time where it stays down for a few days.
Short term – slightly oversold. Still a ways to go before a high confidence buy point.
Medium term – neutral and reflective of the weakness I’ve pointed out since March.
Medium long term – overbought. Unfortunately, lots of room to fall on this indicator.
If you’re not already short like me, it’s not a fantastic time to be opening new shorts as the short term indicator is nearly oversold. It’s unfortunately also not a good time to be buying as you could just be catching a falling knife. Patience is key in situations like these.