MARKET MOOD: YELLOW
One of the key components of how I use this whole ‘red, yellow, and green’ MARKET MOOD coding system is personal performance. There’s a number of reasons for it. One that I’ll highlighting here is psychological.
Picture this, have you ever started to see a bunch of stocks setting up, the market starting to look like its getting ready to go…and feel you’re about to miss the boat? Or how about this… Have you ever been stuck at a traffic light and the moment it turned green someone blasted their horn at you? Maybe they were impatient. Maybe you were distracted. Either way, there was likely a sense of urgency to step on the gas.
My point here is this. The market is an infinite stream of opportunity. If you believe that to be true, then there is never a need to rush. You can operate at your own pace. And part of that pace is tied to current performance and overall confidence.
So, all that said, I still have the market in a ‘yellow’ condition. Here’s the criteria for a yellow condition. When any of these appear, the most I’ll consider the market to be in is ‘yellow’.
Initial buys are 50/50
Trade ideas are 50/50
Some ‘B’ and ‘A’ setups
New Highs vs New Lows are mixed
Indexes are mixed
Given the above, the one thing really keeping the market in a yellow condition is initial buys being 50/50. Last week I attempted 3 new trades: RF, POOL, and CUTR. Both RF and POOL generated marginal losses (-0.5R and -0.27R). I’m still holding CUTR and its up close to +3R. Had my trade selection been different, had I taken say PDCE or ZIP from last week’s trade ideas list instead, I’d be up close to +8R overall on the week and would have the market in a green condition. Since that didn’t happen, I still need to ease my way in.
Does all that make sense? Post a comment in our Discord to let me know.
Heading into next week we have a LOT of high quality setups. The most I’ve seen in a while. There are nearly 40 names on the trade ideas list. I had to really scrutinize which ideas would make it onto the focus list. I’ve added notes on every single idea so you can see the thought process. I encourage you to do the same as you’re building your lists. If there’s a candidate you’re considering, write notes on it whether you take it or not. That then creates the opportunity to go back, review, and learn.
There are a number of A and B level setups. The number of stocks hitting fresh highs is beginning to ramp up again on the NASDAQ and NYSE. More importantly, new lows are in the single digits. Price action is improving on the indexes across timeframes with price moving back toward all time highs and getting back above all moving averages.
Checkout the charts of the indexes below for a closer look at the action.
MONTHLY CHARTS (indexes) Overcall Direction = Up https://www.tradingview.com/x/xVm89apt/?aff_id=15325&offer_id=10
WEEKLY CHARTS (indexes) Overcall Direction = Sideways: https://www.tradingview.com/x/vWwSBz9y/?aff_id=15325&offer_id=10
DAILY CHARTS (indexes) Overcall Direction = Sideways: https://www.tradingview.com/x/4EBqEhB3/?aff_id=15325&offer_id=10
(on the lower right is the image of stocks hitting new highs vs new lows on the NASDAQ & NYSE)
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