Six Rules for Negative Momentum

Buying pressure has declined for three straight days... that could be a sign of a short-term top and pending selloff like August 2022 and February 2023. Here's what to do...

Wednesday, June 21, 2023

Dear Fellow Expatriate,

We’ve had three straight days of weakening buying across the markets. That’s typically an early bearish sign – a BIG RED FLAG that this market could drop sharply over the next two weeks. It’s time to tighten up your stops.

It’s time to add some hedges.

Momentum — in my world — is a measurement of capital inflows and outflows. I measure thousands of stocks and bring everything down to a single measurement: Red, Even, or Green.

If momentum goes negative… you need an action plan. When we have three straight days of weakening buys – and what looks like a pending turn on the daily MACD reading for the  S&P 500 and Nasdaq 100 – it’s time to prepare.

If momentum turns negative… know these 6 rules.

Rule 1: Cash Is My Friend

You want to have a solid cash balance when momentum turns negative. In my trading account… I move to heavy cash.

I’m out of long positions and position my cash for buying opportunities. Since I’m an active trader and investor, I focu…