Wednesday, December 3, 2008

State of the Market - 12/3/08

More of the same today on Wall Street as the market yo-yoed up and down all day, but really didn't go anywhere productive until very late in the session. The market opened sharply lower, bounced for a few minutes, then looked like they were going to fall to new lows again. Stocks held there however and put in a nice hour-long rally from 10:00 to 11:00. They moved sideways into lunch and looked like they were consolidating, but that changed when stocks tried to breakout but couldn't and then reversed lower. After some chop, the market broke down around 1:20, losing all their gains for the day and approaching their morning lows. Out of nowhere, when things looked pretty bad once again, stocks rallied around 2:00, moving all the way up toward the morning highs. They consolidated their gains nicely for the first part of the closing hour, and then took off (just as I left work for home of course) and broke to new highs for the day, closing right near their intraday highs. Volume was also higher which is good to see.

Technically, I don't know how I missed it, but IBD did count yesterday as a follow-through day for the indices. After the selling of Monday, I had no thoughts of the action yesterday being good enough for a FTD day - volume was not nearly powerful enough in my mind - but I guess it does count if you follow the exact rules. I probably have become so oblivious to the FTD because so few have worked this year. Anyway, today was a good follow-up to the move yesterday and it is nice to see we closed at the highs for the day. That being said, we still have some work to do before we can say this market is going to put in a significant rally. The S&P is sitting right at its 20 day moving average (around 870) and the Nasdaq is still a bit below its 20 day moving average(around 1515). They are also still below the trendline that I have shown several times. We are also overbought once again via the McClellan oscillator. I still don't have a good feeling one way or the other. I am certainly not as bearish as I was Monday night,and I am not discounting a move higher here - it is certainly a possibility.

I don't know why, because I said last night I was looking to get short if anything, but I did take two long positions today. I guess I was hoping for a gap up that could be faded, but when we gapped lower and then moved off those lows in a strong manner, I figured it was time to change course for a bit.

I posted AXYS last night as a chart I was watching, and when the market reversed higher and AXYS got above its pivot point around $70, I decided to enter there. I got in at $70.45. When it moved higher, I moved my stop up to around $69.50, figuring if it couldn't hold this breakout, there was no reason to keep it. I really don't like "breakouts" that finish in the middle of their daily range - tells me they aren't real strong and in my experience usually go on to fail. Right now, though, it looks like a nice breakout.

Later on, I also took a position in QLD ($24.93) as the Nasdaq and the other indices consolidated in what at the time looked like a very bullish flag pattern on the intraday charts. I was anticipating here a bit but figured my stop was close by (around $24.50) and was looking at a 2% loss at worst. My stop was hit ($24.44) after the market fell through that flag pattern and I did take the 2% loss. It did end up moving back up in the final hour, but I am not too upset with this trade because I followed my plan. It just didn't work out.

All in all, we had another choppy, up and down session today and because of that, I still lack a great feel as to where we head from here. I am getting the feeling that the market really doesn't know where it wants to go right now either. Maybe it is just waiting for the economic numbers due Friday, which will likely be big in determining the next move. It was good to see the indices move higher late, and I was noticing some really nice intraday charts today. I saw a nice setup on the financials - bounced off support today, forming cup with handle pattern on the 5 minute chart from which it broke out of around 3:30 or so. Same sort of setup on SSO and QLD. However, the breakout that did occur wasn't the strongest I've ever seen, so is that a sign? I really just don't know.

For me, I am happy with my AXYS position and am willing to go long more stocks if they show up, but I wouldn't say I am in a rush. I am also willing to get heavily short if this market if the opportunity presents itself. We still haven't recovered the losses from Monday yet. Basically, I am open for anything because I see a lot of cross-currents out there and I'm not trying to get locked into one outlook right now, I think doing so could get you into trouble. The mantra remains "anything can happen" and being prepared for that should help you out. I will be back later if I see any nice new charts popping up in my scans. Take care.


seeer said...

AXYS looks like a good opportunity, but going long in a bear market, especially in THIS bear market is nothing more just gambling IMHO.
Nonetheless I bought QCOR today :D (greed) because it moved above 9 USD with nice volume, that was a heavy resistance until now, but the intraday chart after the breakout didn't convince me. :) No problem, my stop is tight.

What will you do when the market will reach the trendline? Go short or go long?

Mac said...

QCOR looks pretty good - wish it would have finished at the top of its range, but it could work. So could AXYS. I know from my perspective I don't look at this as a long-term play - just a swing trade that hopefully I can see a 10-20% gain from it if I am lucky.

I have no clue as to what I will do - I really don't have a feel either way. A big part of me thinks Friday will be the day where we will get a big move due to the jobs number, but it will likely be a gap open, which makes it tough to play. Who knows for sure?

Nergo said...

If you needed to hire a trader to trade for you and a maximum monthly fee is not an issue who would you hire/recommend? Who is the best trader? If you don't know for sure who should I "talk" to? The point: I may be over my head here not able to give full attention to trading with a full time job and a family (3 kids). Any assistance is appreciated.

Mac said...

Nergo, I'll trade for you for only $100,000 a month. How does that sound? :-)

Seriously though, I can't answer that question for you. If you are just starting to trade and you have three kids and a full time job, I am sure it is overwhelming. It takes time to learn how to do it well. I am still learning. I started learning when I didn't have any kids, so it was a lot easier to read books and articles and so on. Now I am not doing those things as much - not complaining though. There are more important things than trading.

I don't feel comfortable telling you who to hire if that's what you're looking for because I don't know your risk tolerance, your financial situation, etc. I wish I could give you some guidance - if you have any other questions, feel free to ask or you can email me privately.