The Other Third

Yesterday I wrote a short post about how the market conditions at that time led me to a scenario in which there is a 66% probability of a sideways to continued down trend and given this the odds were not stacked in my favor. This belief was very much situation specific and not set in granite. I've played enough poker to know that a hand can go from hog to dog on the turn and how a failure to reevaluate can be very costly no matter how good the flopped set looks on what appears to be a blank. It's important to me to pinpoint the nuance between when I waffle in my beliefs and when I am reevaluating my beliefs based upon new information.

Based upon today's action there's reason for me reevaluate the probabilities and prepare a plan of action for becoming more focused upon long opportunities and having a focused watch list for tomorrow. There are a couple of things that happened today, namely that the SPX technically, although not by much, closed with a higher high; also today's low may establish a higher low to compare further chart action against. From a price action perspective this is exactly what I want to see strung together from this point forward.

SPX

Secondly, the main breadth tool that I use had 3 bullish signals today. 

Breadth

This is more significant to me than the action and pattern of an index because these signals are based upon price and volume action of stocks I follow and tells me what stocks as a whole are actually doing. When these signals turn it gives me the green light to begin operations on the long side with greater confidence. From my perspective the odds have increased since yesterday. I'll be selective in my watch list with emphasis on stocks that have made recent year high volume such as BGFV and OSTK.

BGFV

OSTK

One last thing I wanted to document today is the intraday action of the SPX which reminded me of a passage I reread last night from “Hedge Fund Market Wizards”.  I've often come across the view that bullish markets open weak and finish strong while bearish open strong and finish weak, but this section in particular highlights more deeply the psychology behind market participants during these stages.

Excerpt from Hedge Fund Market Wizards