It’s been a choppy January and frankly the chop has been around since late November but one index is starting to show signs that it is the relative outperformer amongst the indices. It will also shine a light on the sectors to watch going into mid-February. Ultimately relative outperformers will handle this environment best, and it is our job to find them.

Always important to trade what we see not what we think. Once we have considered sector strength, FOMC messaging, as well as technical clarity, it’s the Dow that has emerged as the leader. Knowing that we also can build far better watchlist’s at the sector and stock level which is one of the reasons I prefer a top-down analysis approach. I walk through the process step-by-step in this video.

This is a bread and butter setup and here’s how it played out in the NASDAQ this morning. A couple things to remember when daytrading. The first two hours after the bell is usually the best time to take advantage of moves. After the first 30-minutes, some of the best directional clarity will reveal itself. Knowing that here is the “Breach Retreat” a setup you can put to work tomorrow.

It all depends on the market structure, so we always start there. It’s as simple as differentiating a non-trending from trending market. Then it becomes easier to pick the indicators and setups you will use. If a market is range-bound the approach must be different than a trending market. Let’s take a look at the indices and determine, “which way are we going next?”