An Aggressive Trading Plan for a Potential Move Up

This column today is a fairly aggressive strategy, and investors should remain extremely cautious because the recent volatility is likely to continue into the near future. If you're a conservative investor and have followed my advice about being fully in cash in this market, you could possibly look at just taking a few very small positions in some ETFs that represent the major indices. We'll look at that in a moment. First, the backdrop.

I'm sure most traders' and investors' heads are spinning from the constant volatility and unprecedented swings we're seeing in the indices. Many investors are stressed beyond belief, and all of the news and conflicting opinions in the market certainly don't help.

In recent columns, I've written that we were due for a sharp bear-market bounce higher, and that certainly appeared on Tuesday when the Dow shot up almost 900 points. Now I expected such a move over a week or so, not just one day, but that's just the way the market works these days.

I also said that my indicators were close to giving off a short-term buy signal, and they have done that over the past couple days. That doesn't mean that we are going to take off into a new primary trend higher, but it does show some better trading conditions are showing up.

As for most stocks, there is virtually no leadership or any growth stocks building or moving out of solid bases that investors can buy on a low risk/reward basis. That is what we are going to need to see before anyone can declare that the primary downtrend has ended.

On the sentiment front, most of my indicators remain stretched to the extreme, but one thing that concerns me about my slightly optimistic view today is that I'm hearing many other market commentators turning positive and stating that Oct. 10 is the absolute low. Readers know that I'm often on the other side of other opinions, and many of the bullish comments that I am reading make me uncomfortable. However, I need to stick to what my indicators are saying and follow the message of the price and volume movements of the market.

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At time of publication, Manning had no positions in the stocks mentioned, although holdings can change at any time.

Mark Manning, AAMS, is an Accredited Asset Management Specialist and Registered Investment Advisor with Butler, Wick & Co., where he specializes in wealth management. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Manning appreciates your feedback; click here to send him an email.