When the market is going through a corrective phase like it is now trading and investing style becomes much more important. In an uptrend, buy points are pretty much the same for everyone. In a downtrend, however, there is a much greater variation in new entries.
Right now there are very few traditional chart setups for the position trader that favors momentum. There isn't much support, positive momentum does not develop and there aren't any breakouts or traditional chart patterns to buy. There simply isn't much to do for a technically inclined position trader on the long side.
In this sort of market many traditional momentum traders stand aside and do nothing. They are not interested in trying to trade until the trend is in their favor and positive chart patterns emerge. For now, they have high levels of cash and try to remain patient.
If that is your style, understand and embrace it. This is a terrible market for good chart setups. I review hundreds of charts every night and could find almost nothing I would consider to be a positive one.
If you want to trade this market you basically have two choices. Focus on short setups, which are plentiful, or look for oversold bounces off of support. The bounces can be very strong when the market becomes stretched to the downside but so far this market has not had much opportunity for a sharp snapback because there is consistent premarket buying that prevents emotions from becoming too negative.
Another opportunity for traders in this market will develop as earnings reports start to roll in. It is important to keep in mind that trading earnings is different than buying standard long setups. Typically, we have to look for either a very strong report that will generate momentum or an overdone negative reaction that will produce a bounce.
The good news is that the recent pullbacks should produce some good opportunities for upside on good reports. For example, Tuesday morning we are seeing a positive reaction to Morgan Stanley (MS) on its results.
With this extremely poor market for traditional trade setups, you have to find other approaches if you want be active. That means focusing on bounce plays and moves created by earnings news.
Focus on those things and you don't have to worry too much about the big-picture issues. When better setups develop you become more bullish. There is no need to worry about timing.
We have a positive open on the way Tuesday morning but the problem lately is sustained momentum. Buyers need to feel some anxiety about being left behind before we will see better upside.