Thursday, February 12, 2009

State of the Market - 2/12/09

Another awful day on Wall Street, not awful so much in the losses that were taken, but awful in the sense that it was another day filled with whipsaws that made swing trading very difficult. Stocks opened sharply lower with the S&P gapping below its uptrend line and continued to sell off for the first half hour of trading. As has been the case recently, the bears couldn't press their bets, and stocks bounced back all the way until around 12:30, with the Nasdaq actually turning positive. They fell all the way down from there, breaking to new lows around 2:45, and things once again looked very bad. But out of nowhere, a super sharp bounce occured at the beginning of the final hour, with the S&P running up over 30 points and the Nasdaq gaining over 40 points in the final hour. Supposedly, this spike was caused by an Obama adminstration proposal to bailout more homeowners, which led to some short covering. Volume looks heavier.

Technically, I'll be honest - I haven't a clue. The trendline for the S&P was broken this morning, was broken once again in the afternoon, but now the S&P has a bullish tail. The trendline was never broken on the Nasdaq and maybe that was a clue that we would reverse. The VIX also reversed and could never break above its downtrend line. Both indices are still below their 50 day moving average and for the S&P, I would still look at that as major resistance. I have said this before, but I'll repeat it - when you have a market that can be influenced so easily by news items, then technicals don't matter as much. If only I could listen to my own advice...

Although the gap down made us a little oversold in the short-term, I felt it was worth taking a chance on a few shorts early on, as I thought this might be the type of open that could finally break things open and get a tradeable move going. I entered OXY short right after the open and was filled at $54.18, which was not great. I entered the order when it was around $54.60. Later on, I entered FAZ for a short-term trade as XLF looked to be breaking to new lows. I didn't take any other shorts as I still think going all-in right now can cause you problems. I'm trying my best to remain patient, cautious, and opportunistic all at the same time if that makes any sense at all. That is perhaps why I've been having trouble recently - it probably can't be done.

I was later on stopped out of my OXY short at $54.61 for a small loss of just under 1%. It went on to move two points off its morning lows before (of course) reversing without me. This was the type of pattern I was talking about yesterday - a bearish head and shoulders pattern that just barely was holding support at both its 50 day moving average and an uptrend line. You would figure a gap below this support to open the day would cause the start of a move lower, and it did for about thirty minutes. But then it just did what all of these stocks seem to do now - reverse as soon as support is broken. Maybe I should be buying all these breakdowns, huh? I am not doing that however.

My stop in FAZ was set very tight because I was looking for an immediate breakout and didn't want to get caught holding it if it didn't happen, so that was hit at $47.78 for a 1.9% loss. I said I was going to keep an eye on it, and I did until around 1:00, as at that time I expected the market to continue to rally and for this to drop. It didn't do that however. I did miss a move up to around $51 on this, but then it got slapped in the final hour, so I would have been out anyway.

So basically, the beat goes on for me, as I was stopped out of shorts that eventually moved lower without me. However, it turned out to not be a big deal because I would have been stopped out in the afternoon spike anyway and probably would have just been more ticked off. This market continues to frustrate most (I assume I am not the only one, right?) and although I have remained mostly in cash this whole year (more than 50%) it is still frustrating to continue to try and make progress in this chop. I really don't know how it is possible to be very successful right now unless you are trading on very short-term time frames (I mean hours, not days).

As it is, we are somewhat oversold short-term and with the late reversal, I don't think I will be taking any shorts any time soon. I have to wait for a bounce. Based on the close, we may bounce here a little higher, but I don't trust it - how can you? - and won't be playing it. And as if we don't have enough craziness right now as it is, I believe tomorrow is also options expiration. Joy, joy. I don't plan on doing anything tomorrow - I need the break. Good luck.


Yin said...

oo91Tough market to trade in. The thing chop intraday and dailys.

bmbull said...

Expiration isn't until next Friday, the 20th. It's always the third Friday of the month.

Tomorrow is just Friday the 13th... :)

Mac said...

Thanks BMBull - thought I read it somewhere on the web but Friday the 13th is creepy enough I guess.

Boomer Angst said...

The market gapped down so fast this morning that all my favorite ultrashort ETFs looked way too extended for me to buy a little. The market still stunk at 3 and I had nothing on, so I went out. When I came back home after 4, I couldn't believe the market had come up so much. Like you, I am also baffled--I find I can't predict which way the market is going no matter what I do or which chart/indicator I use. Hard to make some money in this market, for sure. I'l be in it tomorrow, think there might be a small bounce in the morning, but who knows until it actually happens?


Sharona (also glad tomorrow is not options expiration on top of it all)