Thursday, December 18, 2008

State of the Market - 12/18/08

Another very choppy day on Wall Street today, as traders still can't seem to decide whether they want this market to go up or down. Futures were pretty much flat pre-market, and stocks opened that way. They put in a bounce early and things looked promising, but this quickly reversed and stocks broke through the late afternoon lows from yesterday. They didn't move much lower, however, and rallied from there into the 11:00 hour. They pulled back slowly from there until a little before 2:00, when stocks broke support and fell to new lows for the day. They formed a bear flag at 2:20, fell through that around 2:50 to new lows, then formed another bear flag moving into the close. Volume appears to be even or a little heavier than yesterday but not by much.

Technically, the levels I mentioned yesterday that I was watching to the downside were 895 and 883 on the S&P and 1560 and 1533 on the Nasdaq. Both of the first levels were broken today and both indices are now back below their 50 day moving averages. That is not good. The indices obviously closed off their lows but the S&P just barely closed above their short-term moving averages and the Nasdaq did test those levels today. The uptrend lines are still holding on both of these indices as well. The VIX bounced off some support today around 44 and could move higher from here. So what does this all tell me? Well, if we had a smoother ride down today, I would be clearly more bearish. With this market, however, you just never know. I will watch those trendlines and if we get more selling early tomorrow(perhaps breaking today's lows), then I would expect us to move lower in a more significant fashion. This could all be part of a pullback/consolidation move, but the bulls better step up tomorrow to defend the current levels or more selling could come in quickly.

I debated whether to sell my NVDA and DRYS after-hours last night but I decided to keep them. That looked like a good decision early on as DRYS gapped up once again. NVDA however acted very poorly, falling through some intraday support even with the market being slightly higher and I sold out at $9.05, giving me a 2.1% loss. I let this go a little longer than I should have but was trying to be optimistic. I set my stop on DRYS at $12.57, which was under yesterday's highs and the 50 day moving average. I thought about taking my 9% gain right off the open, but passed and then ended up with a measly 1.3% gain. In hindsight, three straight gap opens was probably a good sign that this was about to reverse. I really am not doing well recently in terms of taking profits when I should versus letting stocks move a little. Every time I let them move, I end up losing a nice gain, and every time I get out early, the stock runs without me. It is very frustrating but then again, the whole market is frustrating right now.

As the market broke down in the afternoon, I started looking for shorts. I entered two individual shorts that looked like they were reversing at key resistance - EDU at $52.71 and NTES at $20.88. I actually added more NTES at $20.81. As EDU broke down, I moved my stop up, honestly not expecting it to be hit. Well, of course it was ($52.79) and I took a very small loss on that. I entered SKF at $109.51 as it formed a nice looking bull flag after breaking out but I was also stopped out of that at $107.85 as it broke below this bull flag, giving me a 1.6% loss. It's always fun to get whipsawed out of a position only to watch it move the other way when you get stopped out. If that wasn't enough frustration for me, I went into SDS at $83.85 and this looked like it was going to work as well - it moved up nicely after I entered. I moved my stop up as it broke to new highs and felt pretty confident about the position. Of course, a spike down took my stop out at $84.32 for a very small gain. The low on the spike was $84.30. A whole lot of trading today that got me a whole of nothing (well, nothing besides frustration).

I don't know for sure what to expect for tomorrow as we have quadruple witching for options, and that typically causes some wild trading. Perhaps that was part of the reason for the craziness of the final two hours. I will watch those trendlines but I would also fear a bear trap for a breakdown here, just because that would be the most frustrating outcome for all and because of the options expiration. I will be away from my computer during the morning, and perhaps that is good - can't trade if I am not there. I am not having much luck right now - not losing much but just kind of spinning my wheels - and when that happens or when you are frustrated, it is usually a good idea to step away until your emotions are back in check. The fam is going out to eat tonight but if I find some interesting setups in my scans, I'll try to be back later with a video. Take care and good luck Friday.

1 comment:

seeer said...

"Every time I let them move, I end up losing a nice gain, and every time I get out early, the stock runs without me. It is very frustrating but then again, the whole market is frustrating right now."

do the opposite of what you think. :)