Breakout or Breakdown

My last blog was posted just after the crazy day in the market on May 6th.

The next day the market moved lower and then went up for a few days before reversing down and moving to a new low on May 25, below the low the low of May 6. This was followed by a short bounce and a return to the May 25 low on June 8. The past 6 trading days have been in an uptrend. Yesterday started off very positive with an attempt to break up and out of previous resistance. This failed mid-day and the market closed lower for the day. Today, we are right back up and over yesterday's highs, once again attempting to sustain a move up.

The net result is a market that has been volatile intraday while staying within a 6% range for the past 4 weeks and showing no clear direction after moving down sharply from the highs of April 26.

However, there are some positive signs and a few sectors are beginning to show the strength to lead the market back up. Even so, it is still prudent to be defensive and continue paring back the weaker performing holdings, adding only fixed income equities, and holding money in cash while the market bounces around.

It is frequently frustrating to sit on the sidelines when it appears the market has started an upward move. Although there may be some lost opportunity by not getting in at the bottom of an upward move, there is potential for greater losses by getting in too soon when the move up proves to be a fake out before it reverses down.