Tuesday, January 27, 2009

I Am Sensing A Few Crazy Days Ahead

I was going to do a video tonight but after seeing the big "news" come out today in regards to the newest taxpayer-sponsored bailout via this "bad bank" idea, I am sensing that the next few days will be crazy and unpredictable and perhaps not worth trading anyway. We have the Fed meeting tomorrow, and those days are typically very volatile - who knows what stunts they will pull and how the market will react. So although I still see an overwhelming number of bear flag setups in my scans as well as an increasing number of head and shoulder patterns setting up in individual stocks, I don't know if I will be able to profit from them. Everything looks bearish but if the government intervenes (which is looking likely) it will be hard to play this.

News-driven markets are crazy, volatile, and illogical, and trying to play them always seem much more like gambling to me than trading. Charts and patterns don't matter in these types of markets. Everything I see points to a breakdown in stocks soon, but I know that doesn't have to happen, so I am going to be extra careful trying to time potential shorts. I hope I am wrong and that I can just play the patterns for what they are worth, but with this "bad bank" idea hanging over the market probably until early next week, I kind of doubt that will happen.

Given that I continue to see virtually no leadership in this market and no stocks that look good on the long side, I won't be chasing any move higher here if we get one. I still don't think we'll get anything meaningful and I would much rather stay in cash until an optimal shorting point comes, so that's what I will be doing. I guess my basic message is to be careful, because as the title states, the next few days might be crazy. Don't trust anything and be ready to get whipsawed.

I wanted to link as well to what I thought was a really good article written by Alan Farley about this current choppy, miserable market we have. I hope his take turns out to be incorrect, but it makes too much sense to not hold some unfortunate truths from my perspective. Just wanted to share. Good luck Wednesday.


canuk1 said...

Hi Marc. I can't say as I blame you for wanting to sit out some of this craziness. There will probably be a Gap and Crap in the morning. If you have not, you have got to read this amazing story, I'm sure you can relate to it and I'd like to share this with your other readers http://nymag.com/news/businessfinance/53617/ take the time to read the comments section as well, It's a blast. I read the Alan Farley article that you posted and it reminded me of another article of his from last year that you may want to read as well http://www.thestreet.com/story/10448384/1/how-the-trading-system-promotes-irrationality.html
Take Care and thankyou for your site

Anonymous said...

I say we get a big bear market rally. There is a new sheriff in town. Every chartists see the same thing as you - bear flags, lower vol. but me think the shorts cant break it down 8K. Play this on the upside. Perception is more important than reality. Thank you for the work on your site.

Anonymous said...

BTW, one of the headlines today was the end of Warren Buffett. Hows that for contrarian!

Mac said...

You could be right but from what I see, there is just nothing to play. I also put no faith in a gov't sponsored rally - we've all seen how great those have turned out.

Canuk - thanks for the links.