The market remains in conflict. For this reason, I am limiting the amount of capital I deploy to swing trades. My current cap is 20-25% of my capital, although deploying less is also fine. This amount can spread out over multiple trades if I see them, or the amount can be concentrated in a few positions.

Also, if trades do trigger me in, I am “keeping them on a tight leash,” meaning if they drop back right after, I am closing them out. It has got to show me strength. If a stock is well into profit, I will trail my stop loss to get out if it reverses. We know conditions are not great out there. Give the market respect; take the money it gives you, and don’t give away any more than necessary.

I didn’t add any new trades from last week’s stock list. Trades from the prior week are either in profit, have closed out near flat, or have closed for a small profit. Very few stocks have recently set up how I like.

However, there are a few still setting up, such as SM Energy (SM), TransGlobe Energy (TGA), Diamondback Energy (FANG), Ovinitiv (OVV), Canadian Natural Resources (CNQ), and Matador Resources (MTDR) on the US side. On the Canadian side, there is Peyto Exploration (PEYUF) and Westshore Terminals Investment (WTSHF).

These are seeing contraction patterns, and the contraction may be the handle of a cup-and-handle pattern.

How the Market Indexes Are Doing

I look at 4 different US indexes because they each tell a different story about overall stock market health. The stock market is healthiest, and swing trading stocks on the long side is most profitable, when all these indexes are in uptrends.

I have also started including 2 Canadian stock indexes for those in Canada.

Charts are provided by TradingView – these are charts I personally use.

All the US indices are in downtrends, although we did get a follow-through day in the S&P 500 (and the Nasdaq 100) in late January. That is the first potential signal to start buying again, which is why I am willing to allocate some capital to trades if I see ones I like.

But the market health indicators also have to improve in order to for me to start allocating more capital. That hasn’t happened yet. If markets continue to drop, there are very few trade signals to take anyway.

The TSX Composite index in Canada rallied back toward the highs recently, fueled by commodity stocks. However, that has also turned lower recently. Tread carefully and lightly, if you are buying into swing trades.

State of the Market Health Indicators

The following chart shows the market health indicators I track. They tell me the condition of the stock market overall, and whether it is a good time to be swing trading individual stocks. All combined, these indicators are weak, indicating conditions are not ideal for initiating long swing trades.

• 33% of S&P 500 stocks are above their 50-day moving average. 35% of all US stocks are above their 50-day moving average. It is generally much easier to swing trade profitably (on the long side) when more stocks are above their 50-day average. When this is below 50%, it tends to illustrate downtrends for most stocks/indexes. We are below the 50% indicator, but it has been improving since late January. Watch if the indicators starts dropping below its recent rising trendline; that’s not good.
• On day 6 of the attempted rally, there was a 1.25%+ gain and volume was higher than on day 5. That mattered for the follow-through day, but Feb. 11 and Feb. 17 were big drops on heavy volume.
• The red bars are showing Up-volume divided by Total-volume on the NYSE exchange. Above 0.9 or below 0.1 are values I tend to watch for. There is nothing of interest here currently.
• The blue bars are the daily percentage movement of the S&P 500. Big moves are associated with downtrends and turning points. Small values are associated with an uptrend. Values of -2 are a warning sign anytime they occur. Big drops on Feb. 10, 11, and 17 show this is still downtrend behavior.
• The blue line is the cumulative NYSE Advance Decline Line. It is as weak or weaker than the S&P 500, so it is confirming the downtrend currently.

What Am I Doing Right Now

I am scanning for stocks to buy that I like the look of. I am willing to deploy some capital - approximately 20-25% of my account to long swing trades. The rest stays in cash or is used for day trading.