Weekly Update: Time to Scale It Back

Ross Givens on September 30, 2022

Welcome to day 312 of the stock market bloodbath.

After peaking last November, stocks have been heading down for all of 2022.

***Weekly Chart of Invesco QQQ Trust (QQQ) – Source: TradingView***

Every time the doors of hope and optimism are opened, fear and selling slam them shut.

The Nasdaq Composite is now down 33% from its highs, wiping out a third of the value of all public companies.

Even worse, the heightened volatility surrounding these moves has created frustrating conditions for both buyers and short sellers.

Scale It Back

Low-risk entry points are delivering at a lower-than-usual success rate as stocks gyrate violently in both directions and trigger stop losses.

With the major indexes trading beneath their down-trending 21-, 50- and 200-day moving averages, the play here is still on the short side.

Still, it has been difficult to get any real traction.

In my opinion, the best thing to do here is trade much less frequently and with much smaller position sizes.

Opportunities are not abundant, so you want to be extremely picky with your setups.

Failure rates are also elevated on both long and short trades, so there is simply no reason to trade large size until positions begin working on balance.

Sell The Rip

Last week, I told you how I was looking for the market to bounce from oversold conditions and then use that strength to sell stocks short against resistance.

That is still my plan of action.

If stocks continue to sell off rapidly, it is best not to chase the action.

Demand good entry points… Demand low-risk setups…

And if they’re not there, keep your powder dry and save your dollars for a better opportunity.

Remember… Cash is a position.

Knowing when not to trade is just as important as knowing when to.

And if you’re not getting odds on your money, why risk it at all?

With all that in mind, here are the setups I am currently watching and were I want to get short…