This week will be shortened because of no trading on Memorial Day (Monday). I have some concern heading into the week. To begin with, lets look at last weeks trading. Thursday saw a sizable sell off on high volume. Friday though, is where we need to look. There was a rally on relatively low volume. This could be attributed to the fact that people were leaving Wall Street to get an early start on their weekend, but it cannot be overlooked. A rally with low volume following a large drop is a negative sign. So we have that hanging over the weekend.
Also, we are getting into a predicament with the Fed. There are a lot of data reports coming out this week, but most investors are worried about rates. If we get positive economic data, it will actually be received poorly by Wall Street because it means that the Fed will be less likely to cut rates. A rate cut typically is very good for stocks. If we get negative reports, the Fed could still cut rates, but it could mean that we are more likely to see a recession.
I see the combination of these items leading us to trade lower this week. I'm recommending to take some profits if the opportunity presents itself. I'd also look to get some exposure to the sell-side if the markets turn. I'm continuing to keep an eye on the Chinese and other world markets as well. ETF shorts (DOG) and (DXD) are easy ways to play any drop. DXD is 200% leveraged short and trades with a little more volatility.