Tuesday's price action was a great example of why cash is a position.
If you are a day timeframe scalper and snaking dimes and quarters is your game, then by all means, enjoy. But if you are an intraday swing trader or a multi-day/week position trader, your best bet is to remain firmly positioned on the sidelines.
An active and resilient trader always can find a few stocks to trade. But anytime you need to search high and low to find a few tradable stocks, it usually is an excellent time to reduce your activity dramatically.
If the thought of not trading sends you into a cold sweat, look at Newmont Corp. (NEM) . I've been holding NEM since early November, and if it can hold above its 21-day exponential moving average (EMA), a close above $46.25-$47, we might catch a rally into the mid-$50s.
If you are an index trader, which I typically stick to in choppy markets such as this one, your opportunities are limited. As a long-biased trader, I have a simple rule in all but the most volatile markets -- to stay out of the market unless price is above the day timeframe volume-weighted average price. While there is nothing secretive or magical about VWAP, it's a simple way to determine whether buyers or sellers exert dominance during a specific timeframe.
If we look at the intraday price action over the past two days on the SPDR S&P 500 ETF (SPY) or Invesco QQQ Trust (QQQ) , we can see that sellers kept prices under VWAP for most of the past two sessions. And I think we can agree that buyers have been outmatched this week.
Ahead of this afternoon's speech at the Brookings Institution by Fed Chairman Jay Powell, TheStreet's Todd Campbell asked a great question on Twitter. He wondered if everyone already expects Powell to send stocks lower with more continued hawkish rhetoric, and whether that trade (short) is too easy. Put another way, Todd questioned whether everyone was already leaning too far to one side.
Frankly, I don't know. But when I look at individual charts, I don't find much I want to buy. While I'm not sure what to expect from Powell this afternoon, the charts, both from an index and individual security standpoint, tell me to be patient and sit on my hands.
