Be Prepared

We will finally put May behind us today. The month won't be remembered fondly by those who were long stocks or commodities. Despite already going through the grinder (which led many to take a more bullish stance), I entered a position Wednesday that was designed to protect against further downside. This is a situation where a trader hopes for the best, but prepares for the worst.

The decision was based on two factors: negative price action and a bearish pattern in the S&P 500. The price action in the indices has been frustrating; the selloffs have been sharp and the rallies have been weak. The late-day ramps experienced during the first quarter, which would miraculously turn a red day to green, have disappeared. Intraday rallies continuously fizzle out and disappoint. We're left with a market that behaves as if it wants to go lower....300 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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