Thursday, January 29, 2009

State of the Market - 1/29/09

Wall Street followed up yesterday's euphoria over more goverment intervention with a dud for most of the session today, as stocks fell at the open and continued lower for most of the day. There was a gap down to start trading and stocks moved lower for about the first half hour, but then bounced back up to challenge the opening gap before 11:00. That resistance held, however, and stocks fell from there steadily through lunch and into the afternoon. Around 2:00, a bottom was put in and stocks bounced for about 40 minutes, but could not bust through the lunchtime lows, and fell back into the close to finish at their lows for the day. The last half hour was just consolidation however, so we'll see tomorrow if we get more selling from here. Volume looks to be a little lower than yesterday, which takes a little sting away, but I don't have the final totals.

Technically, I have been saying a pullback was due and today we got it. It is not really that surprising because normally after Fed days, we get some reverse action of the previous day anyway, but it is certainly not bullish to see both the S&P and Nasdaq fall back below their 50 day moving averages the day after reclaiming them. They closed just barely below all their short-term moving averages as well. Maybe this will just be a slight pullback and we'll keep going higher, but as I have said ad naseum, with no leadership it is going to be very difficult. I think if bulls don't come back tomorrow with a strong day, then this will be a pullback that goes at least to the 800 area on the S&P. If that holds, then we will just continue to remain in a trading range. If it breaks, then I think we visit the November lows. I still see head and shoulder patterns forming on the indices, more so on the Nasdaq than the S&P.

Although I was not around a computer at the open due to some treacherous roads here in the northeast, I did enter some shorts later in the session. I took ACM short at $26.42, RRGB at $12.55, and UAUA at $10.61. Later on in the final hour, I entered JPM short at $25.81 and PNC short at $34.36, instead of playing FAZ which I had directly in the middle of my quote screen but I passed. I don't know why - hesitated around $45.20 and then it was too late. These were all smaller than normal positions due to my recent struggles - I always think it is a good idea to trade smaller when you are on a losing streak. I am trying more but smaller positions in hopes of having a better chance of hitting a winner.

I continue to be very frustrated right now just because I can't get anything going and it seems like whatever I do, it is the wrong choice. I don't think my reads on the market have been wrong, but inevitably I have been choosing the wrong stocks to play, or I have set my stops just a bit too tight, or I waited just a bit too long to enter a position which gave me too little of a cushion to trade properly. Today was a prime example, when I had a choice between RRGB and HIBB as shorts. Their intraday charts looked almost identical, and I went with RRGB based on its daily chart. For the rest of the day, HIBB fell nicely and RRGB just sat there and did nothing. That's how it seems to be for me lately. We'll see if these shorts act any better or if I will once again be out quickly with small losses.

As a trader, I think you are always going to have these type of tough times where things just don't go your way. It's part of the game. The key is how you deal with it. If you let yourself get too frustrated, you can end up making bad trades, overtrading, taking on too much risk, and getting yourself into even more trouble. I have done that on a few occasions and certainly am not immune to it. If you do things the right way, though, you have to believe you will be able to pull through those rough spots eventually and get back on the right track. At least I hope that's how it will work right now for me.

Hopefully you weren't chasing weak stocks higher yesterday and were able to get some shorts on recently. I have no way of knowing if we will fall further tomorrow - the GDP report will likely have something to do with that. To be honest, nothing would surprise me right now. My game plan is still the same - look for shorts and stay away from longs. If I have time later, I'll see about doing a video and show you some of these head and shoulders I see starting to form. Take care.


hayfro said...

I'm in the same boat as you. The only right thing I've been doing is keeping my position sizes ultra small until a clearer trend shows up. I keep getting whipsawed out of everytrade I make. Entered a few shorts at the close (MSFT GE CCL FDX COST) so we'll see how that goes.

Congrats on the Steelers making it to the big game. I put up a fan video on my blog if you haven't seen it, check it out. I think you'll appreciate it!


Mac said...

Thanks. I'll check it out - I actually put together a video of my own to get "pumped up" but haven't posted it yet - I may do so on the blog. I am a little nervous about the game though - they should win, but that doesn't mean they will.

Good luck on the shorts - for both of us I guess. I had CCL on my quotes today - looks pretty good.

Anonymous said...

Check some trading blogs, discouragement and frustration abounds...choppy market conditions back to back with horrendous macroeconomic numbers.

Anonymous said...

Mac if you carefully look at the SPX volume preceding October crash, up volume generally is higher than down volume until the acceleration or panic selling start to kick in. Volume perhaps is a good thing for individual stock but SPX volume...I am not sure.

Jeremy Nathan said...

I found your blog a few weeks ago and have always enjoyed it since then.
The market continued to be frustating for me, as a beginner.
One thing I wanna ask you, how do you identify strong stocks and weak stocks?
thanks for your market update everyday and good luck trading