Todd Horwitz Chief Strategist BubbaTrading.com
Be Prepared not Surprised
We can certainly use some Dramamine after last weeks wild trade. We wrote that we were in a bear market but were seeing a rip your face off rally which was in its third day. Remember, bear market rallies are the most powerful short term you can see.
By the end of the week the rally was over, the February lows were taken out. The action was bearish and late Friday the selling accelerated. News started to hit the tape about Russia and Ukraine, Gold and Oil exploded to the upside. Fear was everywhere making the selling relentless.
Tomorrow is Monday February 14th Valentine’s Day; will this turn out to be the St. Valentine’s Day Massacre? No one knows for sure but the uncertainty troubles investors plus the weekend to think about it. We could see a major hit or relief rally.
What we know for sure is new February lows, selling pressure across the board and a rising VIX. These are all signs of a market that has room to the downside. You must remember that the rallies in a bear market are meant to be sold.
No surprise that call buying leads the way but as we often remind you, we don’t know the other side of that trade. Put buying, Call selling were the dominant trades for the week. Watch the VIX for clues, a rising VIX in a rising market will indicate the rally is false.
The bulls were buying the SPY, QQQ, PYPL, TSLA and MARA while the bears were after CWH, PTON, VXX, AMZN and ROKU. Let price guide you not the news.
Remember, we can’t predict what’s next, but the price action will give indications and guide us in the right direction. All signs are starting to point lower however flexibility is the key to trading successfully.
As traders and investors, we have one thing to remember, follow the trend of the market. Be patient disciplined and leave your emotions out. The most important thing to remember is money management and self-control.
Todd “Bubba” Horwitz