I’ve recently reduced positions sizes dramatically and am playing the market more defensive in case we get an October pullback in the stock market. The following are some warning flags I’m seeing:
- Tech stocks coming under selling pressure finally and many breakouts are failing.
- XLF tried to break out above $28 but failed which is a key resistance area. I’d like to see the $28 level be taken out again to get more bullish on the market.
- The Stage Analysis Screener has been showing more stocks moving into Stage 3 and 4 than Stage 1 and 2 for a few weeks now. Along with that only a few sectors are outperforming, it’s pretty much limited to technology and cannabis.
- The uptrend in the market since July has been very orderly and the market is overdue for some volatility.
I talked about the financials in my last video but I view them as pretty important here. If XLF gets back above $28 decisively and starts moving higher I will instantly change my opinion. Flexibility in the markets is key, if I’m wrong about being defensive I can change my mind without reservation.
As far as the cannabis stocks go a market pullback could cause them to continue to trade sideways to lower, but it would also setup another good risk/reward buy point as they approach the 30-week moving average.
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