WHAT TO DO?

I have been debating this for the last month or so, after we had the severe decline in stock prices. My plan as I had posted earlier, was to sell on a rally off that low point. It is always easy to say that, but defining the exact point is never an easy task. The COT report is released after the close today, so I do not know what that will show. I had planned to wait for the commercials to get heavily short before exiting, however on this screen, there are a few reasons why I am front running that plan.

First, I have a proprietary indicator which I just call the Long and Short indicator ( L&S). As you can see, it does a pretty good job of calling short term highs and lows, and it is in the sell zone here. Also, the commercials started moving off their heavy long positions two weeks ago. The other thing that I have displayed here which concerns me is the Small Specs increasing Long position. It is back up to a level similar to where it was in July. This is an indicator that I want to fade.

The last, and most important reason why I have exited today is that the value stocks I had purchased, which led the market rise significantly, have lagged it considerably, on the bounce off the lows. I view this as a sign of underlying weakness of the overall market. Last, the heavy seasonal down bias is here. It is possible that the big decline we have already seen is all that there will be, and the seasonal would still be accurate if that were to be the case. However, the seasonal calls for fall buys, so that is where I am focused.

I still have a profitable trade, so it is time to take the profits and wait for a better entry point.