Thursday, February 5, 2009

State of the Market - 2/5/09

The chop continued today, as the stock market started lower at the beginning of the session and looked to possibly put two days in a row in the same direction, but that selling didn't last long. Another rumor came out (this one about the mark-to-market rule) around 10:00 and stocks quickly reversed themselves and moved higher all the way to lunchtime with the Nasdaq leading the way. From there, stocks bascially just moved sideways for the rest of the session - traders probably remembered the jobs number tomorrow and were hesitant to do much else before that comes out. Volume was a lot higher today.

Technically, the Nasdaq closed just above a downtrend line on heavier volume but the S&P closed belows its downtrend line and still has its 50 day moving average to deal with overhead. The Nasdaq is getting slightly overbought in the short-term but the S&P is still pretty neutral. My other oscillators and indicators are all still pretty neutral so there still isn't a big edge out there from what I see. I continue to see a possible head and shoulders pattern of about two months setting up on the Nasdaq in particular, but I also can see a potential longer-term inverse head and shoulders pattern setting up on all the indices, so who knows? I'll be honest - I certainly don't. Anyone that tells you they know what is going to happen next with this market is just guessing - no way to know with as many news items and rumors flying around each day.

Based on some setups showing up last night on the short side, I decided to make a small foray back into this market, basically just to see if it was ready to start acting right. My foray lasted for about an hour. I went short UNP at $45.49 based on it being right near a downtrend line and its 50 day moving average. It did break down from there almost another dollar, but then the whipsaws started showing up again and I was stopped out at $46.24 (stop was at $46.14 - another bad fill) for a 1.8% loss. Not a big deal - it basically tells me that it is still not time to trade heavily in this market because it is not ready to act in a manner that is tradeable for more than a few minutes or hours. That's why I only went into one short. If I had success, I may have added more, but that didn't happen.

I still see very few longs that interest me and I continue to ask "what exactly is going to lead us higher?" when contemplating a possible rally in this market. I just don't see it, but I can be wrong. My longer-term outlook is still bearish, but as I said earlier, who knows? We are kind of in uncharted waters here, not just as a market but as a nation, with the entire crisis we are facing and that is making things tough. No one know what to expect, what will happen next, what will work and what won't. Tomorrow will likely be crazy because of the jobs number, so after poking my head out today to check the weather, I am probably going to go back into hibernation for a few more days or at least until trades start acting right. I don't think we're there yet and until we are, 'why trade?" is still my motto. Good luck if you are still trying to fight this market and as always, if I see something that tells me it is time to start making bigger bets, I will let you know. Take care.


Gio said...

How does FAS trade at 111,000,000 shares while controlling only 175,000,000 in assets?

Anonymous said...

Gio - I'm not sure but I'm guessing it's because it's mainly a product for daytrading and not investing.

Boomer Angst said...

I found one stock to go long just before the bell (my first trade since last week), but I'm tightly stopped in case it doesn't work out. Big call options activity seems to point to a rise, but in this market, who knows?

I do tend to be a grinder, aiming to make at least five hundred per trade without putting a lot of money at risk. So, if I manage to get that amt. tomorrow or Monday, I'll take the money and run. In this market, you take your profits fast.