Looking for a potential snapback rally tomorrow morning. (August 05, 2019)

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This was a pretty brutal day today but it was actually really kind of the culmination of several down days. Something that I have been talking about for a while is this wedge pattern here ( INDEXNASDAQ: NDX ); this type of deal where we can draw this any way you want, but we’ve got higher highs, higher lows but they are converging and that is a wedge pattern. Typically what will happen is, prices will kind of start falling out the end of the wedge, it will kind of resemble water falling out of a garden hose, as you stand there in the morning watering your garden, that type of thing.

So this is what we’ve got here, but then you get this kind of move and hope springs eternal, a gap up and then a sell-off and that isn’t good, and then again, hope springs eternal. What I am doing is saying gradually people forget about this little dynamic here that is happening but the Nasdaq ( INDEXNASDAQ: NDX ) never really does quite get too far above this last high. And so you look at this thrust above 8,000 and that’s great but it’s not like there is much of a base from which to move a lot higher. So you look here, a test again, you get 1, 2, 3 tests of this 8,000 level and we’re still not quite there and that’s just last Tuesday. And then the wheels are slowly coming off the wagon.

So this is my suggestion for you tomorrow: Don’t sell at the open. My bet is if the Nasdaq ( INDEXNASDAQ: NDX ) opens down here, it’s just getting uglier, Google ugly and you are going to get this chart ( NASDAQ: QQQ ) after hours, this just keeps getting lower and lower. Typically what will happen in a situation like this is that traders, both money managers and self-directed or retail traders whatever you want to call it, alike will go, Holy crap! I have got to get out of this market right now.

Plus, you think about it from a money management standpoint, if this is where the Nasdaq ( INDEXNASDAQ: NDX ) was, I am just going to use this chart, you can apply it to any of the major indexes, but if this is where the Nasdaq ( INDEXNASDAQ: NDX ) was here on December 31st, it was up as high as, you know you are up 25 percent now, at least where it is right now you are up just 15 percent, guys, that’s kind of a big number. That’s a big difference to be up 25 percent and then now you are up only 15 percent, you’ve given up about 40 percent of your gains just in a few days so you are going to get traders that are selling this. This is close to the 50-day moving average just like the SPY ( NYSEARCA: SPY ), there it is, right at the (not the 50) the 200-day moving average after hours.

So this would be my suggestion to you: Don’t sell right at the open. When things seem like they are at the worst they can be, they probably are the worst that they can be. This is something that we have been looking for, been clearing out many, many names in our Growth Stock List, for some pretty solid profits over the last several days and weeks. We have been closing them out and now we are heavy cash and I am suspecting that tomorrow we will see some pretty good buying opportunities and it will probably be just after the market opens and everybody gets done puking them up then we can start taking some fairly quick trades to the upside. That’s how I am trading it.

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