Dear Trader,

I told you I may have covered this for the last time yesterday. One more time, just for you…

I have been diligently watching these MEME stocks so I can have an indication as to when these investors are going to be shifting their focus from Risky securities to the ‘safe zone’ of the market

These stocks are finally starting to have their dose of Hopium wear off and they are getting hit with reality harder than most people could have possibly expected.

Let me break down what the end of the reign of terror the MEMEsters have had means for you.

Now that the volume crescendo has come to an end this ‘indicator’ – yea it has become an indicator – is actually going to do its job.

The sell-offs are happening and the market is hitting a period of extremely low volume as the MEMEster money leaves the market.

The indicator signaling this tells you something very important about what the markets next volume move move will be.

How to Line Your Pockets in a Low Volume Market

How to feed yourself in a thinly traded market. You prepare by setting your bear traps NOW.

Do the work now, youll feast on the rewards you reap.

The last month has been brutal for the traders out there with the 4-6 week outlook.

For the first half of the year, the market played into my hands as it followed the
Rule that I repeat so often….

Volume is the fuel that makes the market move

So, results tend to slow a bit through July which is what I saw, but for me, the light volume trading is offering something that I love about this time of year…

It is a Time for research and beginning position yourself to close the year strong.

Trends are trends. It dosent matter if they are traded on light volume or heavy. That’s a fact. Just look at the last month in the market as things trended higher on light volume.

“The path of least resistance is almost always to the upside”. The market is famously known for doing a “random walk higher”, this means that the market will find itself moving higher by its nature until acted upon by an opposing force.

That force is volume and a trend.

One of those happened last week when we ran into the 200-day, but more importantly the 20-month moving average

200-Day

20-Month

“Luck Prefers the Prepared Trader”

Let’s face it, the summer seasonality is a little maddening, but I’m going against the grain when it comes to trading.

Sure, I’m going to get a little aggravated over the next week or two while I wait for some positions to come into the seasonally driven surge of volatility, but will I really?

In the last couple of days while the market saw a few bumps we were able to take four positions out of the portfolios with some really nice gains…

These positions wouldn’t have been on if I didn’t continue to trade through the low volume

Here’s my bottom line….

Put time on your side: I always say “use time and space” when I talk about options. In this case, I know where the market is going, I know the likely timeframe so use the flexibility of options to “prepare” by adjusting the time variable.

I just did it at Macy’s and I’m getting rewarded today, already!

Let’s Take a Walk Down Retail Row

Tis’ the season for retail earnings and they’re delivering something along the lines of what I expected.

Look, the retail sector is the hot one right now – that’s where the volume is.

Let’s start with the stage setting… WMT, AMZN, and a few others gave us a show at the beginning of earnings season.

Investors and analysts had done a good job of lowering their expectations on these headliners, but now it’s time for the rubber to meet the road, and so far, things are wobbly.

AMZN shares were highlighted in my 200-day trouble stock on Tuesday for a good reason, the market is moving away from the retail giant.

That vacuum is leaving the rest of the “nuts and bolts” retailers in a dubious position…

Look at the report from Macy’s…

It showed the market’s willingness to come in and “believe” in the stock for a day or so.

Never mind the fact that you can still buy a toaster and other silly things at Macy’s while everyone in the business is screaming “INVENTORY CONTROL”.

Then comes JWN after hours last night and it alone is likely to shake the retail world as it stood out as the “American Express” of retailers.

Urban Outfitters… Same story.

These are more on the discretionary side of something that is discretionary.

ANF – watch it. Trading down 1.8% — that’s a $13-dollar stock trading right now at $19. And then GPS. Come on. GPS isn’t done with its inventory problem. BURL, that’s another one.

All of these companies, right down the list.

Within the next two weeks, these are not going to be light-volume traded situations. These are going to be heavy-volume situations, and if you’re looking for the opportunities, take them.

Look, it’s imperative you keep an eye on who’s coming up to bat over the next two weeks.

They are doing more than providing opportunities, they’re telling you what much of the market won’t about the economy.

I’m going to be looking at them with my Night Trader and Penny Nation people.

We’ll trade these, but we’ll also spend some time setting our bear traps.

Talk soon,


Chris Johnson
Quantitative Specialist, Penny Hawk


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