Friday, September 19, 2008

State of the Market - 8/19/08

Another crazy, crazy day today on Wall Street. After your friendly Treasure secretary Hank Paulson announced more bailouts on the taxpayers' backs last night, along with the restriction of short selling on virtually any financial stock, a huge short squeeze was put in motion. Markets were up big across the globe, and the U.S. market followed suit. All the indices gapped up, but the Nasdaq faded throughout the day as the S&P and Dow went basically sideways in about fairly narrow range considering the earlier gains. They finished with large gains (over 3%) and volume was once again strong.

Technically, I do find it interesting that the indices found some resistance at their 50 day moving averages today, and if I was in a better frame of mind, I would say that this rally will fail here. However, as I mentioned last night, technicals may not matter here. I do think we are setting up for a major fall, and the short covering of the past two days can't prevent that. If we get a follow-through day starting Tuesday, then maybe I will change my tune.

I once again made no moves today and continue to think I will be sitting on my hands for quite a while. The action early today was crazy. ZION hit $131. SKF was halted for several hours. I read many stories of quotes lagging and orders not going through on several other blogs. Just too crazy and unpredictable for my tastes.

Last night, I showed some stocks I was watching in case we do bottom, but there were about three or four stocks I was really interested in if we happened to rally for real. They were CRDC, CLNE, STSI, and FSYS. Only one of them moved higher (FSYS) and I think rather quickly that told me all I needed to know about this rally. With all of the volatility, charts are an absolute mess now both short and long, and since you never know what news will come out that is going to move this market, doing much of anything remains difficult from my perspective. I do see a lot of charts that finished way off their highs for the day.

I would have been interested in taking some inverse ETF's off the opening gap, and I still may (SDS and QID), but I am scared about waking up one day and reading that the government has outlawed all shorting, with all the Proshares ETF's being liquidated at a set price. Seriously, I kid you not. How do you think those SKF holders felt today? I am putting nothing past these guys after what I have seen recently and will continue to stay in cash.

There are many reasons I am really upset and bothered by what I see going on right now. I mentioned many last night. One more thing that is bothering me is purely selfish. I feel I have worked very hard to try and learn how to trade - reading, studying, making mistakes, learning from those mistakes. It has been a long and difficult journey like it is for any trader. At some points this year, I felt that I had gotten to a point where I was comfortable with my ability to make money in the markets. I thought I was at a point where I could consistently pull profits from my trading. I knew I was going to make mistakes, and that I still had a lot to learn, but I thought I was doing well. This week makes me think that this journey was all for naught. I don't know if our stock market is ever going to be the same. I may be overdramatizing this (and I really do hope I am) but this year has done more in my opinion to hurt the credibility of Wall Street than anything I can think of, and it is probably only going to get worse.

Yes, I know, the game was always rigged. I realize that. The big boys always had the inside info and as an individual trader you were always a step behind them in that area. But at least the small, individual trader had a chance if they worked hard and followed the time-tested rules of price and volume action. With all of this government intervention and propping up of this market, I don't know if the game will ever be worth playing again, or at least I hope just any time soon. The past two weeks has made this market seem like simple gambling more than any other time I can remember. Trading is something I can enjoy. Gambling is not something I enjoy.

If the government is going to blatantly interfere in the markets and continue to socialize all losses on the backs of the American taxpayer, then any edge I have as a trader is pretty much gone. I am asking myself right now if all the work I put into trading is even worth it. I may need to look at other ways to supplement my income if this is how the market is going to act and be acted upon for the near future. I probably would be better off playing poker or something rather than risk my money in an environment like this.

This rant may come off as whining, and I don't mean it to sound like that. I know life is unfair. I really do hope this whole thing works out somehow and we can avoid financial armageddon, not so much for me, but for my son and future children. This whole thing is very disturbing to me, not as a trader, but as an American. I wish there was a legitimate third-party candidate running for president this year - I would vote for him or her likely in a second.

I am glad it is the weekend, although I cringe to think what Sunday night news will come out this time. The fact that we rallied today is meaningless to me. The moves put out there by the Treasury and SEC today show how bad things really are (that they are not telling us about), and I have a feeling that the recent lows will soon be tested. I hope they aren't. I hope we can legitimately rally from here. However, the action in individual charts doesn't give me any warm feelings about that happening. Perhaps my outlook will change after going through my scans.

It is funny how people never learn from history. From everything I have read, our government is following the script of 1990's Japan to a T. If you are not aware, that is not a good thing, and the next decade will not be fun if it plays out the same way.

Enjoy the weekend. I know I need it. Hopefully I can keep my computer off and stay away from any news channels to clear my mind of all this garbage for at least a little bit. Good luck.


Anonymous said...

Hang in there...things will work themselves out. Extreme circumstances demanded extreme intervention. The government had no choice in their actions..they had to bring stability and some confidence back in the market. Just think how all the poor smucks feel that have been long stocks over the past year feel?? They have been hammered relentlessly. Alot of people are just investors not traders and these people have been unmerciously beat up. In time things will work out. Like what was said on CNBC, this is a century event and hopefully it won't happen again for another century if ever again. Have a GREAT weekend!

Anonymous said...

I totally agree with you and don't believe that the "rescue plan" will work. It looks like a conspiracy to me at this point and it stinks ...

hayfro said...


I feel the same way about how the Gov't interferes in the markets. I'm from the US, born and raised in Pa, but moved to British Columbia and I'm so glad to be out of what appears to be a dying economy. Where does the Gov't get all this money to do all this stuff? Americans are going to become slaves to the Gov't I fear.

I think sooner or later the markets will do what their going to do no matter how much the gov't tries to manipulate, so for the time being caution will be rule #1.

Take care, leave the computer, and have some (me) time this weekend. We all deserve it.

Jeff (Zentrader)

Mac said...

Good comments folks. Hopefully we can get through this. I am sincerely worried however that we won't.

Jeff, where were you from in PA? I'm a Pittsburgh boy. At least I have some football to watch this weekend. It's funny you mentioned being out of the American economy. Not that I would ever do it, but the thought of moving elsewhere has crossed my mind from time to time when I think about where we are possibly headed.

Have a good weekend all.

Gio said...

hey Mac... i agree with yah. sticking their fingers in a few holes in the dam.

I have some catching up to do on your blog, but looks like you're site is on fire! I've been venting ever since Bear Stearns. When I heard AIG, i was steaming up!

Have a good weekend.

aka "THT"

Gio said...

BTW, SKF hit my $85 target. who would have known?

Mac said...

Thanks Gio. I keep an eye on your Ibankcoin stuff as well - good work as always.

I just want a market that's tradeable again - that's all. right now it seems to be gambling.

Anonymous said...

This is going to end ugly. Bush doesnt know the difference between the economy and the stock market. He isnt going to find a way out. This will come crashing down by November.

hayfro said...

Wow, small world. I lived in the Oil City/Franklin are for most of my life, but my work had me living in Latrobe for a few years before I moved here 5 years ago. My best friend lives in Pittsburgh, but I haven't been back home in quite awhile I miss the southside and Nicks Fat City for concerts, but Vancouver is amazing.

Mac said...

Anonymous - I hate to admit that I voted for Bush - I consider myself a conservative - but I am no longer a Republican. The Republican party are no longer conservatives, and there is no doubt in my mind that Bush will go down as one of, if not the worst, president in our country's history. It's a shame, but that's what happens when you do the exact opposite (starting wars, spending money you don't have, etc) of everything you ran on (no nation building, cutting spending, less government). I have no desire to vote for John McCain either. I really do wish Ron Paul would have ran as a third party candidate.

Zen - are you a big Steelers fan then? If you lived in Latrobe, you probably checked out a few training camps in your day.

hayfro said...

I've been a Vikings fan for 23 years even though every year I question why. All my friends are Steelers fans and you wouldn't believe how many Steelers fans are here in BC.

I'm a big fan of Ron Paul as I thought he was the only candidate that really knows what's going on.