Tuesday, April 15, 2008

State of the Market - 4/15/08

Things started well today in the markets, as investors shrugged off higher inflation data and gapped the markets higher at the open. This buying enthusiasm was short-lived, as the open marked the highs for the day and the indexes sold off the rest of the morning. Around lunchtime, the market found a temporary bottom, and gradually rallied into the afternoon near the highs made at the open. We couldn’t quite close at or above those highs, but the indexes finished with medium gains.

Do these gains mean anything? I would love for today to be the start of a nice move higher, but until we get follow-through and can put three or four days together of solid gains on higher volume, I have to assume today means nothing. This is what has been lacking for a while now. Volume was in fact higher today which is nice to see, but we are still sitting right underneath the 50 day moving average on the Nasdaq and S&P 500, so until we get back above those averages, I would remain hesitant to get really bullish, as much as I would love to do so. I still lean this way, but am not leaning very heavily.

In terms of my trading, I was stopped out of ASTI today for a 5.3% loss. The position wasn’t large but the loss was bigger than it should be from my perspective. I moved my stop level up after it gapped up on news this morning, figuring that if it couldn’t follow through today after being down for the past four days, it wasn’t worth keeping. My real problem with the trade was that I bought poorly because I anticipated a breakout instead of waiting for one, and I also didn’t stick to my original plan and stop loss level. I am usually pretty good with taking my losses quickly, but recently I have found myself doing this for the past few trades I have taken – setting an original stop-loss level but then moving it lower as the trade began to go against me. This is one of the worst things you can do as trader, and I feel it is because I am letting my overall frustration with this market get to me. Everyone knows this is an awful market for pretty much anyone, but I have to keep my discipline and remain focused regardless. As I see this now happening, I think I need to step back and not even take the small trades I have been taking these past two weeks. I am pretty much flat with my WSCI and GU positions, and am not seeing much of anything that gets me too excited anyway. If I find anything in my scans I will post charts later tonight.

Basically, we have the same old story. This market still sucks for bears and it still sucks for bulls. You are a tremendous trader if you are making a lot of money right now. My account has pretty much stayed the same for the past two weeks. Eventually things will change, but if I said I knew when it will happen, I’d be lying. About the only bright spot I can see right now is that although the past week or so has been frustrating, it has probably been constructive as well. We are no longer overbought going into the heavy dose of earnings reports we are about to face, and in fact are a little bit oversold. I kind of wish we would have faded at today’s close like yesterday to build this oversold condition up even more. This is a much better setup for bulls and gives us the chance to rally if these reports are not quite as bad as everyone thinks they will be. Unfortunately, no one knows what the market’s reaction will be to the reports, and that’s really what you should focus on. Not a good time to short right now unless we bounce for a few days, and it’s still somewhat dangerous to buy any of these pullbacks with earnings ahead. Sit on your hands and you’ll probably be better off.

Two links for you to check out – one is the newest article by Jim Jubak describing the major debt problems our government and populace in general have. It is amazing to me that more people do not know about these issues, but sometimes the truth hurts and people would rather not hear any of the bad news, even though it is reality. I know I got depressed reading it. The other is from Danny at iBankCoin. I had not seen this video clip before today but found it both enlightening and frightening at the same time. It is a 60 Minutes interview with the Comptroller of the U.S. (basically our country’s accountant) in which he describes the truth about our severe debt problems as a nation. If you don’t feel like getting bummed out, then don’t read or watch them, but if you want to educate yourself, I encourage you to read and watch both. It’s funny how the only Presidential candidate I hear talking about these issues is Ron Paul. I’m sure universal health care won’t cause more problems for us in this area, right Hillary?

I post some charts later if I find any. Good luck.

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