Friday, December 12, 2008

State of the Market - 12/12/08

A failed bailout/handout attempt for the automakers/UAW caused some panic early today on Wall Street. Futures were down big pre-market and it looked like we would get more selling on the back of yesterday's break of support. That did not happen, however, as the gap down proved to be the lows of the day, as stocks rallied from there and closed near their highs for the day. It certainly wasn't a smooth ride though, and there still seems to be a lot of uncertainty in the air right now. Volume was mixed - higher on the S&P which lagged today but lower on the Nasdaq which outperformed today.

Technically, I think I will just put up some 15 minutes charts that pretty much tell the story. It is good to see we didn't have an awful day, but we have climbed right back up former support levels that could prove to act now as heavy resistance. It looks like both the Nasdaq and S&P have regained their short-term moving averages. There is a good possibility we still fail around this area next week, but there is just as good a chance that we were just consolidating this week and will break above the declining 50 day moving averages next week. To be honest, your guess is as good as mine right now.



It took just about everything I had this morning to not sell my SDS and QID positions at the open of the pre-market session. QID was at $75 and SDS was at $95, and selling both then would have given 9% and 8% overnight gains respectively and also would have put my account at all-time highs. For some reason, I held and just decided to put stops below yesterday's highs, as I realized we could bounce off the opening gap. I didn't expect those stops to be hit, but they were. QID was hit at $71.45, which gave me only a 3.4% gain. Kind of sucks. My SDS stop was not hit right away.

After the market did bounce off the opening gap, I decided to enter a few more inverse ETFs - went into DUG at $31.55 with a stop below $31 and SKF at $133.95 with a stop below $129.30. I didn't have a good feeling one way or the other about them as I knew this market could be crazy today, but felt they were worth the risk at the time. When the market broke to new highs for the day, my stops were hit on both. DUG gave me a 1.98% loss. SKF gave me a 3.7% loss. My SDS was also stopped out at $89.34, giving me a 2.8% gain. Basically, I am back to where I started at yesterday afternoon.

Later on, as the market rose without really breaking back down, I started looking at longs and played the intraday chart of DRYS. I went in at 9.05. It did take off nicely and at that point, I moved my stop up to breakeven. It was hit around $9.07 which gave me a very slight gain but nothing really. After that, I gave up and pretty much called it a day, admitting to myself that I had no clue what was going to happen next on this day. I probably should have done that much earlier.

Needless to say, it was quite the frustrating day for me. It would have been nice if I just would have followed my instincts to sell out pre-market and just sat back the rest of the day in cash. Can't do anything about but learn though. Anytime news events are taking center stage(like now), trading becomes even more difficult in my opinion. I think today was an example of that. Not only is there no way to know what the news is going to be, but you also don't know how the market will react to it. Right now, although I am not losing money, which is always the first goal, I am not making any progress either. I am trying to force things a bit and probably overtrading. That is never a good thing. I keep expecting a big move and don't want to miss it, but this week we really wen't nowhere when you look at where we started and where we ended.

I wish I could tell you where we head Monday morning, but I honestly don't have a clue. I don't even have a good feel one way or the other. It all probably depends on this bailout. If it gets done (which I assume will happen because that's how Washington works - no ability to stand up for any principles) then I could see us gapping up Monday. If it doesn't get done, who knows? Basically, if you like gambling, the current market is perfect for you. As for me, I will have to wait to see what happens and then react accordingly. Perhaps I won't do much of anything. We will just have to see how it goes. I'll try to be prepared for whatever happens - that's probably the best game plan. Keep an open mind here and be ready for either outcome. Enjoy the weekend - I'll be back with a video at some point. Until then, take care.

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