Oct 28, 2026 · 54 min
Listen from 45:42
Listen at 45:42
Traders map the signals that favor defense over offense
Playing Defense: How To Know When To Cool Your Jets
In deceptive, range-bound markets, protecting capital depends on distinguishing temporary weakness from a genuine improvement in participation and money flow.
- 1Major indexes, sector leadership, and growth-versus-value ratios help frame risk appetite beyond headline market moves.
- 2Position sizing around earnings must account for implied moves, unusually large gaps, and the limits of hindsight.
- 3Breadth, money flow, and defensive rotation can show when a cautious stance is becoming more constructive.
Don't miss
Connor Bates explains how improving breadth and money flow can signal a transition from defense back toward offense.
The brief
Connor Bates of Revere Asset Management revisits the shift from strong momentum to severe drawdowns, arguing that traders must stay nimble as markets turn range-bound and deceptive.
Using the S&P 500, Nasdaq-100, and Russell 2000, Bates reads moving averages, oversold rallies, and failed breakouts while warning against decisions based only on hindsight.
Sector leadership and earnings risk sharpen the framework: coordinated strength in groups such as memory and cybersecurity matters, while positions ahead of earnings require room for unusually large gaps.
Growth-versus-value, high beta versus low volatility, and defensive rotation reveal whether investors still support aggressive strategies or are moving toward safer groups.
The Revere 50 watch list and McClellan Summation Indexes provide a practical test: improving breadth and money flow can justify moving from defense toward offense.
What was said on this episode
29 statements · 14 positive · 12 negative · 1 mixed · 2 neutral
Traders must remain nimble because market conditions can change rapidly.
“it's definitely been a year that you have to be nimble and you can't get too attached to your opinion because kind of the tape can change at a dime.”
Listen at 3:05
Choppy markets make breakouts more likely to fail.
“CHOP is when, you know. a lot of breakouts stop working more failure prone”
Listen at 7:51
Investors should increase exposure in rising trends and reduce size in choppy conditions.
“you want to be aggressive, heavier when they are trending above a rising 821 50-day moving average. And then again, take the size down and shop”
Listen at 8:54
Positions should always have stop-losses.
“we always have stops”
Listen at 10:28
Trading inside a broad range creates more problems than trading its extremes.
“that's where the most issues occurs when you're trying to trade inside the range versus trying to trade. you know sell into the upper end of range if that's what you want to do and then you know trying to buy the lower end of the range”
Listen at 10:51
The memory sector is not currently a market leader.
“at the moment, I wouldn't really call it a leader”
Listen at 12:26
Memory-sector fundamentals are currently bullish.
“the fundamentals are very bullish”
Listen at 12:35
Micron setups are more failure-prone when other memory stocks weaken.
“if Micron's the only name that's holding up and you think it has a good setup, it's going to be more failure prone”
Listen at 13:28
Coordinated sector setups after a catalyst can create attractive trading opportunities.
“when you see a sector, when there's a catalyst and you have a group of stocks all setting up in unison, you know, that. that is a you know potential fat pitch”
Listen at 17:34
Earnings positions should have roughly twice the options-implied move as cushion.
“we always look at the implied move. And ideally, we want to have two times cushion the implied move.”
Listen at 19:22
Investors should not hold earnings positions when cushion is below implied move.
“you can't hold into earnings if your cushion is less than the implied move for an earnings”
Listen at 19:46
Most earnings moves remain within the options-implied range.
“typically more times than not they typically stay within the implied move up or down”
Listen at 21:28
Growth-stock strategies perform best when growth leads value.
“the best environments are always going to be when growth is leading value”
Listen at 23:41
Growth may outperform value in the coming period.
“we might be entering a period where growth can outperform value from here”
Listen at 25:28
An overbought secondary indicator does not by itself justify selling stocks.
“it doesn't mean sell your stocks”
Listen at 29:35
Investors should halve normal risk when market indicators appear overheated.
“Maybe if you're going to buy a stock, you risk half of what you normally would”
Listen at 30:01
Defensive consumer leadership signals poor conditions for growth stocks.
“if the stocks leading on your list are, you know, toothpaste, grocery stocks, Coca-Cola, Pepsi, probably not a good market for your growth stocks”
Listen at 32:20
Consumer-staples strength can signal defensive money flows and impending market weakness.
“Staples will tend to start getting a bid and it's telling you my money's going into safety. There could be something coming.”
Listen at 32:37
Risk-on markets occur when high-beta stocks outperform low-volatility stocks.
“Good markets are going to be when high beta outperforms low volatility.”
Listen at 37:03
Low-volatility outperformance indicates defensive conditions and reduced risk appetite.
“when that is flipped, then it's more of a defensive. There's not as much risk appetite in the market.”
Listen at 37:08
Watch-list quality and recent-trade feedback are the most important market inputs.
“your watch list is always going to be your most important along with like feedback of your recent trades”
Listen at 37:48
Difficulty building a watch list signals weak market conditions.
“if we have a hard time making that list that tells you everything you need to know about the market”
Listen at 40:25
Watch-list quality is highest when it contains multiple leading growth themes.
“the most quality is when the list is filled of 10 different leading growth themes”
Listen at 43:26
An oversold RSI turning upward with a rising summation index signals a potential buy.
“a signal to me is when you know you get rsi below 30 it starts to hook back up you get the the summation index turn on a buy signal”
Listen at 45:02
The NYSE McClellan Summation Index measures broad participation and market health.
“the NYSI is just going to give you a broad view on market participation and overall market health”
Listen at 45:42
The recent breadth reading was worse than the tariff-crash reading.
“this reading that we just hooked up from. is is one of the worst readings that you know it was worth worse than the tariff crash”
Listen at 45:49
Improving breadth and risk ratios may indicate a shift toward bullish market conditions.
“all these are saying potentially it, you know, market could be turning into a bullish posture”
Listen at 49:54
Investors should begin with smaller risk and increase exposure progressively.
“you always want to start by, you know, risking less and you want to progressively expose.”
Listen at 50:14
Oversold indicators turning upward may signal a market reversal.
“when they're all oversold and they're hooking back up, well, that's telling me that, you know, we could be making a turn.”
Listen at 50:32
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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