When all is dark, look for the light.

The market still seems to have some more to fall before it gets oversold. But the negative sentiment is very high, and all the indicators are pointing to oversold conditions.

Here is the summary trending for short-term, mid-term and long-term.

This is based on my modeling system, not a scientific or industry proven method. It uses the moving averages of price to determine trend. And then based on the current trend, it tells me the likelihood (probability) of the continuation of the trend. (The detailed heat maps are at the end of the note).

When I see a red chart like the above, it tells me there is lot of fear in the markets. And greed should be jumping in soon. But there is no way to say in advance when the bulls will jump in. However, when they do, I will see it in the price action.

I was short the market and did well last week. However, I closed my positions Friday late afternoon as I did not want to carry over my positions over the weekend. Just mitigating risk with everything going on.

Clearly, markets can go lower from here. And if they do, I will be ready to trade it in the lower direction. It can have a bounce as well. I just don’t know. Every day in the morning I remind myself that I have no idea what the market is going to do. What happened the previous day is history and not necessarily an indicator of what will happen today. This thinking keeps me alert and ready for taking advantage of whatever the market gives.

I also want to emphasize that I do not trade individual stocks during earnings releases. Yes, they do have big moves and can be very profitable. But I do not have any edge and have no idea what is going to happen after earnings release. Last week, NFLX had a big pop and TSLA was down big. I had no way of knowing in advance. And while there were number of experts and pundits who came on TV and said what was going to happen, I do not trade based on that.

Here is the full trending heat map for the major markets:

Strategy:

As mentioned above, I am net neutral at this time. The pre-markets are indicating markets will open lower. I will be ready for the markets to move in either direction and play the trend as it develops.