Thursday, October 23, 2008

State of the Market - 10/23/08

Stocks were all over the place once again today, as this market and its direction gets harder and harder to decipher. Stocks started slightly higher, quickly fell, but then rallied back up and around 11:00, it looked like stocks could run a bit after being beaten down for the past two days. However, after reaching those highs, stocks just drifted lower, couldn't hold their morning lows during the lunch hour and stocks fell down hard, breaking through yesterday's lows and in the case of the Nasdaq, they broke their lows from two weeks ago. At 2:00, stocks did begin to bounce into the close, which allowed the Dow and S&P to close higher and the Nasdaq to close off its lows. Volume was higher on the S&P and Nasdaq.

Technically, it is really becoming quite hard to get a technical feel for this market. Normally, I would say it is bullish for the Nasdaq to break its recent lows but then close well off those lows. Normally, I would say it is bullish that the S&P broke its triangle pattern to the downside but closed higher for the day. We aren't in normal times however, so I don't know what to think anymore. We are still at historically oversold here on many measurements and I think a big bounce would not be a surprise at all. It also wouldn't surprise me to see these recent lows broken hard to the downside next week. Nothing surprises me right now. What I am going to focus on is whether this market can get over its short-term moving averages - it has tried twice in the past two weeks and has failed both times. I am watching 950 on the S&P and 1700 on the Nasdaq as key levels. If we can clear those on high volume, then maybe we can get a small trend going higher rather than this current roller-coaster ride that is taking us nowhere.

S&P 500, Nasdaq
Chart from Telechart2007, Courtesy of Worden Brothers, Inc.

I stupidly made two more small trades today - SSO at some intraday support (although I should know by now that term doesn't really exist anymore) at $29.33 and QLD at the same support at $31.32. I was expecting a rally today and after stocks bounced back, I thought it was worth taking a shot on a pullback that we could move higher. I ended up with 3% losses on both of these positions. These last two weeks haven't destroyed my account or anything - I am down about 4.5% since I jumped back into this mess but am still up 75% for the year. In hindsight though, I was doing so well staying out of this market and remaining patient, but thinking I would miss a big bounce, I let myself be pulled into trading conditions that have frustrated and confused even the best of traders, let along someone of my experience. Lesson hopefully learned though - you always have to be on the ball as you can easily let yourself slip into bad habits if
you are not careful. We're still not in conditions that will allow you to make a ton of easy money. Hopefully, those conditions will present themselves at some point in the near future.

If I see anything interesting in my scans, I will post later, but I just haven't in recent weeks so I doubt I will see anything new today. Let's hope for once we can get some follow-through tomorrow to the late bounce and this market can move in one direction for more than a few days. Good luck Friday, stay patient, and stay positive. Better times will come at some point - we just have to wait for them. Take care.

Tags: ,


Anonymous said...

Hi, if you missed to short the sep-oct08 bear market then so be it. Now is the real time to be patience, market is choppy.

Mac said...

Definitely agree.