Thursday, July 10, 2008

Not the Time to Make Big Bets Long or Short

As the title suggests, I am hesitant to make any big moves right here on either side of the market. The trading intraday has been very choppy and volatile this week, and the possibility of us blasting off on a powerful, short-covering bounce exists just as much of a powerful, panic selloff exists. Because of this, I'm not putting up any charts tonight because of that. The indices do look to be consolidating a little bit here, but that could be consolidation for a move lower or consolidation that forms a medium-term bottom. I want to wait for some confirmation before deciding which way we're going, and will trade accordingly.

The Worden Report is still pretty bullish in the short-term about this bounce - they felt Monday's action was capitulation (although I disagree) and feel we have more to go before the primary bear market kicks back in. That certainly is a possibility. I just want to see the indices get over their short-term moving averages (the same ones they failed at Wednesday) before getting short-term bullish. The levels I am watching are 11,345 and 11,420 on the Dow, the 1270-1277 area on the S&P, and 2280 and 2300 on the Nasdaq. These are going to be tough to get through, but if they do, I will turn short-term bullish and look to possibly play some swing longs.

The Dow, S&P, and Nasdaq all undercut the lows of Tuesday today so the official rallies attempts via IBD are dead, but I believe the rally attempt for the Russell 2000 is technically still alive. IBD did not mention much about this in the Big Picture, but I believe my interpretation here is correct. We could have a follow-through day starting tomorrow, and if we do, I have to give the market respect and look to be more bullish. A follow-through day would coincide with the indices breaking through some of the overhead resistance levels they failed at Wednesday. There are some good reasons to be bullish - we're extremely oversold, and some sentiment indicators like the bulls/bears survey is at extreme levels. The main problem I have being bullish is I am not finding a lot of nice charts. If we do break higher soon, I will post the charts that stand out to me, but for now, I am just sharing my current watchlist. Unfortunately, it is not as long as I would like.

Long Watchlist: CRMT, ARST, FLIR, AVAV, ENG, OME, ABAT, VRUS, CAP, IXYS, FCN, IDSA, IPHS, MFLX, BMI, AUXL, OFI, ENER, AZC, and PARL

I am still willing to take selective shorts, mainly in the coal and steel sectors (still look toppy to me) but I am more inclined to just manage the ones I have right now. I don't feel like getting whipsawed out of trades right now - I thought about putting one or two shorts on as the market broke their afternoon lows today, but am glad I didn't - I would have been out of my positions with losses within an hour. It's just not a great time to add extra risk. Here are the shorts I am still watching. I have posted some of these charts this week.

Short Watchlist: HPY, SOL, HIBB, NFLX, CMP, RIMM, FSLR, DSX, ZEUS, PSEM, GGB, ICO,
SID, ESEA, FMC, ACI, CNX, ANR, PCX, SQM, and JRCC

I apologize for not putting charts up but I don't feel strongly enough about any of these to do so. You can investigate them for yourselves and see what you think. Please feel free to ask me any questions on the lists and I will do my best to answer them.

Tomorrow's trading will likely be dictated early by GE's earnings report. The earnings season adds another variable into the equation here that makes things even more difficult. Just my opinion, but I think waiting for more confirmation of the market's intentions here is a smart idea. I don't feel like giving back many of my recent gains if I don't have to. If you do decide to make trades, please stay disciplined and honor your stop losses. Best of luck Friday.

2 comments:

Gio said...

The ag stocks turning out to be a good short here. I dumped my SQM longs when it failed to move with other commod stocks. Ill be shorting that, maybe IPI, PoT, and TNH.

Josh is sick? What happened to him. Hope he gets better, I like his commentary tOo, but I like his screens better.

Mac said...

Yeah, I keep waiting for my SQM short to start working - maybe today.

Via his commentary, Josh has been having problems with his MS (I think) so hopefully he will feel better. He seems like a real good guy and is a very good trader who I've learned a lot from.