Monday, December 15, 2008

State of the Market - 12/15/08

With a lack of clear closure over the weekend to the news issues affecting the market, Wall Street opened pretty much flat today as no one seemed to be eager to take any positions and trading seemed very light. There was a downward bias for most of the day with some slight bounces mixed in, but the action was so slow that I don't know if it is worth analyzing that deeply. There was a late bounce that came out of nowhere that took the indices off their lows for the day, but the market still finished with slight losses. That bounce shows perfectly why trading in a low-volume environment is so difficult, and we definitely saw lower volume today.

Technically, the indices broke down out of what now look like bear flags on their intraday charts after rallying right up to former support areas. I showed these charts Friday. It wasn't the most powerful breakdown though and came on lower volume, so I think things are basically still up in the air. I think that late bounce proves that fact. The possible bear flags that are being formed on the daily charts have yet to be broken to the downside, so we'll have to wait for some confirmation of the next move. The numbers I will be watching to the downside are 850 and 815 on the S&P and 1478 and 1398 on the Nasdaq. To the upside, I will be watching 885 and 905 on the S&P and 1535 and 1590 on the Nasdaq. I hope I am wrong, but I think we may be facing a trading range here, which is going to make things difficult. We need some volume to come in in order for a break of any of these levels to be meaningful.

No trades for me today. I went into the day today really not expecting to do much, because none of the news items I mentioned in the video were taken care of over the weekend. Until they are, things might stay this way. I was watching the inverse ETFs throughout the day and almost got drawn in a few times, but I am glad I showed enough discipline to stay out. There just aren't a ton of great opportunities out there right now.

If it stays like this(trading in a range on lower volume), it might actually be a blessing for me. I've been thinking about just shutting it down for the year for several reasons. For this week, I have meetings the next two days at work and won't be near a computer, so that makes following things much harder in the short-term. That is another reason I sat out today - wouldn't have much of a chance to follow them tomorrow. In addition, with this being the last full trading week of the year, I think the action next week is going to be thin and quite choppy. I am up around 94% in my main account right now for the year, and unless some really good opportunities come up soon, I don't know how smart it is to risk those gains in a questionable environment.

More importantly, my wife is scheduled for a c-section delivery for our second son on December 30, and I know that my focus will not be on trading for a few weeks at that point and rightfully so. Everyone I talk to says going from one kid to two is a huge adjustment, and I guess we'll find out soon. So I know that I won't have much time at least early on to dedicate to following this market(not as much as I usually do), and until I can adjust to the responsibilities of being a parent to two kids instead of one, sitting out may be smart from my perspective. If the blog posts thin out considerably for a few weeks, you'll know why.

This weekend, I said things are up in the air right now and I don't think that outlook changed for me today. I would basically recommend just watching those levels mentioned above and if we break above or below those levels on some heavier volume, then perhaps move on some trades. I would not try to anticipate here - the thin volume is going to make things tricky. If I find anything interesting in my scans, I'll be back later, but as of now, I don't expect to find much. Good luck Tuesday.


swingtrader said...

One kid to two is definitely an adjusment and will likely affect you time and trading more than you expect. Congratulations! Good luck with the procedure.

Mac said...

Thanks for the well wishes. I am expecting a pretty big change but when you experience something completely new, you never know quite what to expect.

Woodshedder said...

Mac, I'm wishing you the best.

Not to jinx you, but my trading success took a fairly significant drawdown after the birth of my second child. If you are feeling at all overwhelmed by trading with the added family stress, or you are feeling at all guilty about putting so much time into trading and blogging with a new baby around, then I recommend that you take a break from trading and/or blogging.

On a lighter note, 2 of my 3 boys were born C-section. I LOVE C-section. So easy and low stress (at least for us guys).

Best regards to you and the wife.

Mac said...

Thanks for the well wishes, Shed. I hear you about the low stress for us guys. I've heard stories from inside the delivery room and most are not things I want to experience personally if I can help it. The recovery time is a little longer with the c-section, so I guess there is a tradeoff.

Thanks for the advice as well. I can certainly understand why anyone's trading would be affected. If you don't have the time you normally do, it will affect you. I think I will probably take it easy for a while and see how it goes. Perhaps it will be a good test of my discipline or allow me to develop some more discipline. I've heard going from 2 to 3 is really nothing, but it's that second one that's a big adjustment.

Keep up the great work on Ibankcoin. I enjoy following the Big Bamboo system.