TradeWinds for May 21st

I am back with a TradeWinds update. I have not been posting as regularly because it is taking a lot of my time. I don't mind doing that because I am doing it mostly for my own benefit. I would like to get more feedback from the readers out there - I know there are few - of what you like or would like to hear more of. Please drop a note - a little positive feedback can go a long way to motivate my posting.

Now I know you have to like some of my recent calls on the market, as we have been spot on the past couple of weeks. Here is what I said on my weekend update, " I kinda of think we will see some more upside early in the week and then some weakness. For you traders, that means look to be taking profits on any open positions and then look for buying opportunities late in the week." Well, after seeing a nice rally on Monday morning, Miss Market has been heading down, down, down. Of course, only half my prediction for the week has come true, we now need to see if there will be buying opportunities in the last couple days of the week.

I have said once before that all trends, long or short, break down at some point when you think they are just testing a support point or working off an over bought/sold condition. Some people call this an inflection point where Miss Market has to make up her mind where to date McLong or McShort. We are certainly at the inflection point and tomorrow will be critical to see who she takes to end of spring dance. Lets look at our indicators.

We still have nice solid TradeWinds momentum on our slow indicator. That means there is still bullish underpinning to the market. The moderate momentum is just starting breakdown and the fast momentum is just about at the oversold point. All of this says we are just working off some bullish excess and all will be fine soon for the longs. If you read back over several of my last posts I have been worrying about the moderate momentum not breaking down and recharging, I think this dip - as sharp as it is, is the price to pay for that. That is healthy and I think we should hold about right where we are at, base a bit and then move up.

I also want to note the curiosity of how the market broke down today. Most of the day we were having a nice consolidation day moving up, then moving down. Then "the news" came in the form of the Fed minutes and all the headlines were about inflation and the fear that the Fed is not going to cut interest rates anymore. Crash goes the market. Now, with food prices rising daily at the grocery store and oil at $132, does anyone in the right mind not know that inflation is a bit of a worry? And with interest being slashed over the last few months, does anyone in their right mind think the Fed is going to cut more? So the Fed says what everyone already knows and the air goes out of the market. I have seen this event happen so many times where the pundits tie the market move to some single event or speech, when in fact the market was technically primed to move in the direction it did. The big money houses didn't just realize that inflation is a problem or interest aren't going down more. Its part of the silly game that is played everyday.

So what to do? Well, I say be cautious until we see that this sell off is indeed done. I have been right often, but I will be wrong as well, so don't take my word for it. Trust, but verify. I actually got suckered a bit myself on the Monday afternoon dip. I thought it was too sudden and deep to be real, so I took some long position expecting to dump them for a quick profits when the expected down turn came. See, I am not perfect.

Now check out our Top 25 lists and TradeWinds Black Box results.