Wax On, Risk Off

One of the luxuries of being a blip is the ability to go from 0 to 60 to stopping on a dime with minimal energy spent and impact felt. Those who trade with size and move markets can not do so with nonchalance. They can try to slowly liquidate and pass off from strong to weak hands, but when they want out of a room that's well over capacity and there's only one exit it becomes completely evident what they're up to. This is why it's important to pay attention to the stocks that trade with the highest dollar volume and/or are often spoken of and about as leaders.

Today the market moved from risk on to bum rush the exit as many of these stocks have been taken to the woodshed. The preponderance of evidence now indicates there is a change of character in the market and attention must be paid to it. In my weekend review I noted to pay particular attention to the bigger monied stocks as breadth indicators were sending me a mixed message and I felt it prudent under the circumstances to defer to the behavior of individual stocks. Early in the morning many of these spoke, or rather shouted. that the minefield was live and heightened caution warranted.  

AMZN

FB

PCLN

SPLK

YELP

The preceding are just some of the momentum stocks that took it on the chin today.  In total 361 stocks in my universe were down 4%+ today on higher volume.  Coupled with this, the well known fear index $VIX has been spiking too suggesting that concern about the general market has heightened over the past couple of weeks.

$VIX

These are the moments when gains can evaporate, or worse, become loses.  It's of utmost importance to have a game plan of action as to what to do when the calm water becomes a furious whirl pool. A week back I penned (figuratively) a post about mistakes and moving forward. I still have the two open positions I mentioned --AMBA and RKUS --with strict guidelines as to how I will trade them, so in this regards today's action is just noise and does not effect me in the least. My swing trades however, have been abandoned with profits and losses booked as they are on a completely different trading plan and time horizon, and are cut without hesitation when it's clear large distribution is hitting the tape in an extended market.

Moving forward I expect the continued noise of the debt ceiling to be in play so capital preservation until this resolves is the number one priority.  Earnings season will be in play so rebuilding watch list during this period will be where I'll put some of my energy.  Going over previous trades and noting where I've improved and what still needs to be worked on will be my focus.  From every pullback and correction comes renewed opportunity and a robust playing field to take advantage of.