Time To Wait Patiently For Opportunities

Fellow trader jdpeak over at Shark Investing posted this quote yesterday:

Do you have patience to wait till your mud settles and the water is clear?
Can you remain unmoving till the right action arises by itself?

Lao Tzu
Tao Te Ching

I now have that printed and placed where I can see it while I am trading. The conscious decision not to trade is just as important as the choices we make when actively trading.

Today the water is a little muddy from my perspective, although I am leaning bullish for today. Looking at the SPY chart, we are resting on a fibonacci retracement:

Looking at the McClellan Oscillator, the past two days has relieved overbought conditions:

I am lightly invested here, and will look to do some careful trading. Asian markets were mixed overnight, and European shares are slightly positive this morning. We also have employment numbers before the open today, which could move the market.

Looking past today, I think we are likely to test the lows in the near future. I still consider bullish sentiment to be too high so soon after such a precipitous drop. Let’s take a look at the Bullish Percent Index for the SPX:

I will once again point out that volume was rather light during our recent rally. No leadership has emerged. I consider the financial sector to be overvalued on a fundamental basis, and charts still show a bearish orientation for commodities.

I have said in the past that the new leaders are likely to arise out of emerging markets, technology, and commodity sectors. If we successfully retest the lows, and bounce higher with some volume and conviction, I will start feeling more comfortable putting money to work on the long side.

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