Momentum Monday – To Buy or Not To Buy the Dip?

All charts on Momentum Monday are powered by MarketSmith

The weakness in small-cap and momentum stocks has quickly spread to large caps and almost all industries across the board. Is this just another dip buying opportunity or the beginning of a deeper pullback? It’s too early to tell.

All major market indexes (SPY, QQQ, IWM) are below their 50-day moving average, which is a big yellow flag for long-only momentum investors. If Russell 2000 cannot sustain a significant bounce from $160, things might get a lot worse for the general market.

The next earnings season starts in a week. Financials typically report first, followed by tech. Earnings season typically brings a lot more volatility but also gives birth to many new trends. I will be paying a close attention to how the market reacts to companies’ results. It’s the ultimate measure of market sentiment. Bulls should get a lot more concerned if we see start to see earnings selloffs on good numbers.

On Momentum Monday, we cover the price action in enterprise software stocks. We also go over the world and check how different markets are behaving. Lastly, we also talk about how we approach market pullbacks.

Don’t forget to check out my latest book: Swing Trading with Options – How to trade big trends for big returns.