The market is tough. I've been convinced for a while that we were going to tumble further then the low set on March 14th, but the market followed through and confirmed the rally on March 21st. Since I won't argue or trade against the market, anymore at least, I had no choice but to sit in cash or nibble on some longs. I didn't want to sit on all cash, since the markets will do what they want, so I chose to nibble just in case my bearish assumptions were wrong. So far it has worked in my favor, but now not sure for how much longer.
The markets haven't acted badly since the follow through, up to today, where we got our first distribution day. Now it might be just jitters ahead of big economic reports tomorrow (anyone's guess at this point what the market wants out of them) or the weekend (Iran is out of it's mind and cornering itself to a point it may not be able to get out of).
I did have some breakouts today I did not take because volume was suspiciously low.
What to do? I'm going to watch the tomorrow very closely, if the action looks bad, I will most likely move back to cash and pull up my short list (which by the way has grown in the last two days). I will probably wait for next week to initiate any shorts as I don't want to be run in by an early rally next week if there are no major problems in the Middle East or elsewhere for that matter (rally may not happen, but want to remain cautious).
I know this makes me look like a flip flopper, but I'm a swing trader and need to adjust weekly, sometimes daily (which I hate, but have no choice), until I can see the true trend. How do I know it's a true trend? Breakouts/breakdowns hold their pivot points and continue to follow through before their first major pullback. So far, that statement holds true on the bull side. The problem, the number of leaders (breakouts) is still scarce.
All I can advise at this point, keep doing the homework. When markets have no clear trend, it's better to sit in cash or do as much work as possible so you're not caught with your pants down. Once a trend is developed and you're on the right side, you can take a breathe or two, but never for too long.
GOOD LUCK and buy a lot of Excedrin tension headache pills if you're trading.
If Iran is truly cornering itself with a confrontation with the West, the markets will sell off as they usually do leading up to the boiling point. But, historically, when these confrontations come to a head (i.e. War), US markets start major rallies and not continue the sell-off leading up to the solution (if you want to call war that).