Market Breaks to the Downside, Cash Continues to be King

Last Thursday night I spoke of two diverging signals: the major indices had bearish setups while individual equity leaders had bullish setups. It only took two sessions to determine a winner, the bears.

I spoke very bluntly to "proceed with caution" and commented on how to maintain much lower position sizing and to not fret about being heavily weighted in cash. I was close to 90% cash heading into last Friday, and I am back to 100% cash now.

Overall unless you are a day trader who can watch the market throughout the day and take advantage of short term breakdowns or rally's, this market is no place for you. That is my situation.

Trading for a hobby is fun. My strategy is to simply let the stocks tell the story. When stocks are breaking out then breaking down my tight stops are triggered and I am forced back into cash. Not only does this make for a nice stress free environment, but I also beat the market averages by standing on the sidelines.

Tonight's charts are very straight forward. I have my two favorite indices the S&P 500 and the NASDAQ. I then have a chart of a leading financial stock, JP Morgan Chase (JPM). Simply put, when leaders start breaking down, watch out for others to follow shortly behind. However, then there is Gold.

Gold is once again the only bright spot in this current market. While GLD has performed well the last few weeks, individual gold stocks still are mixed. Rest assure though if any glorious setups do emerge, you will be the first to know about them.

View all S&P 500 charts.