In looking at the market this morning, I cannot help but be concerned about the blow-off, climactic, and parabolic nature of what I see in many stocks, sectors, and indices across the board. Keep in mind that in such circumstances, the structure underneath the market is unsound.
That means that when the market rises this fast, there is not enough volume at price to catch a fall. On a volume profile, you will see what I call a lot of “air pockets.” The market will tend to fall through these “gaps” in volume fast. I call those liquidation breaks on a five-minute chart. But on the daily chart, the ride is unpleasant if you are long, no matter what you name it.
I would be cautious in holding longer-term swing trades here until we get a good break and begin to repair some of the underlying structure. Repair means that we get some solid volume at these price levels to convince us that the institutions are interested.
Stay tuned,
A.F. Thornton