The last few days of action on the NASDAQ have started to give me concern about the market’s short-term direction. The market was acting strong prior to the last few days, as the distribution count was settling down and the index was pushing into new high ground. But after running straight up for 8 out of 9 days, the last thing you want to see is a reversal at new highs on above-average volume (like we did on 10/22). I would have thought the reversal would send us lower for a few days, looking for support. However, we snapped right back up to the highs one day later, and now find ourselves reversing at the highs again. Volume is on track to be above-average by the end of the day, which would make this a classic stalling move.

So in response to this action, I am trimming (in a minor way) higher-cost purchases to some positions. I still feel optimistic about the intermediate term, but the next couple of days, I’m not so sure about. Selling positions that you are down on, or not much up on, will make it easier to hold core positions through volatility. Keep in mind, you can always buy stocks back when they return to logical support or present you with the next recognizable buy point.

Best returns,

Scott O’Neil


MarketSmith Incorporated

Follow Scott O'Neil at