Wednesday, April 15, 2009

State of the Market - 4/15/09

Another very bullish session today on Wall Street, as the indices tested the support levels I mentioned yesterday early in the session, retested them several times later in the session, and then rocketed up into the close as the support levels held properly. The only thing I didn't like about today's action is that volume looks as of now to be very low, even compared to last week's levels. That is not bullish.

Technically, the 835 and 1600 levels proved to be very important on the S&P and Nasdaq respectively, as both were tested several times today and held. That is very bullish and until those levels are broken along with the uptrend line, I have to give the bulls the benefit of doubt here. A break above 865 and 1660 would give the indices another higher high which would also be impressive. We obviously remain overbought on some indicators but that doesn't seem to matter right now. The only thing I would worry about is volume - I want to see it increase on up days and decrease on down days. The past two days have seen the exact opposite of that.

Today was a lot of fun for me...not. When the levels I mentioned yesterday held at the open, I decided to go long a few stocks. I went into BAC at $9.59 with a stop below $9.40, although I was also watching FAS and WFC at the time and both would have been better choices. I also went into RGR at $11.35 and SOLR at $7.19 as both made nice early moves. I was a little late on both but didn't want to just jump in too early. When the morning bounce failed, I was stopped out of BAC at $9.38 for 2.3% loss and moved my stop up on the RGR position to about breakeven. That stop was also hit at $11.29, giving me a small loss of 0.7%. I thought this one looked very promising early on, but the close was not impressive at all and it now looks like it is not ready to break out yet. My SOLR positon is still on the table with a slight gain.

I am very frustrated right as I can't seem to win. I knew to play the market long today in the first half hour of trading, but came away with absolutely nothing overall. I think if I didn't have bad luck, I'd have no luck at all. FAS, WFC, and BAC were all sitting on my quote screen this morning and for some reason, I went with BAC. I was expecting a big move. When it finally moved up to around $9.80, I had a small gain and figured it was good to go for the rest of the session. I felt comfortable keeping my stop below the low of the day at that point, figuring it would not get there. Well, it promptly reversed, went to new lows, and then zoomed higher the rest of the day without me. Looking back, however, I don't think I would have traded it any differently. When it lost that momentum early in the session, I didn't like what I saw. The thing that is even more frustrating is that both FAS and WFC never came close to testing their lows for the day, and I would have likely still been in either of those positions right now if I chose them instead of BAC. I honestly don't know if that's bad trading or bad luck or a combination of both. Whatever it is, I know it is extremely frustrating. I think I just need one or two nice gains to get my confidence up, but I just can't seem to get them. I would be looking at gains of over 20% intraday today if I just would have chosen FAS instead of playing BAC.

After today, the play continues to be on the long side, as the bulls continue to hold support and show strength. I still have my doubts about how much longer we have on this rally, and I will be keeping a close eye on volume over the next few days, but I don't want to fight the trend right now - I have to respect it. I can only hope that I have some better luck over the next few days if I add more longs, which I may do. Good luck Thursday and take care.


Cocameister said...


I feel for you right now. You are out of sync, and we all want you to get back on track.

I looked at your BAC trade on a 5 minute chart. After the gap down, BAC tried to rally, but got stopped right at the 20 period SMA on the 5 minute chart. It then pulled back to create a lower low around 11 AM, but formed a massive positive divergence on the MACD and the CCI (20). So, even though took out low of day, it was a great opportunity to go long there. Do you use these indicators intra-day? Lately I've only been trying to buy if there is a positive divergence on MACD (usually on 15 minute time frame) or at least a CCI below -100. And because the intermediate trend is up (and there are massive positive divergence on weekly charts via MACD, RSI, etc), I feel more confident about buying stocks when everything looks terrible price-wise and looks like "breaking down".

I'm certainly no expert, and have struggled mightily with the market myself. The other thing that has helped me make some good profits lately is not using such tight stops, just for the reasons I describe above (trend is up). Now that it seems this Primary Wave A (down) is in place and we are in Primary Wave B (up), the intraday volatility is just that, volaltility (and market makers wiping out stops). I've been able to "swing trade" and hold for days (instead of minutes to hours) for the first time in over a year. This has helped relieve the paranoia of needing to place the stops overly tight as not to lose any more money.

My other suggestion is trying some of the moving average cross-over systems on the intraday charts. They are usually winners and keep you in the direction of the momentum. Some of my favorites are 16-34 EMA cross on 15 min SSO, 9/39 EMA cross on 15 min SKF, and 9/39 on 15 min SRS. Just look at the charts and the performance of these babies. It's awesome. BTW, all of these exit at EOD, so no worry about gaps overnight.

Anyway, I'm not trying to be critical at all. I hope you don't take it that way. You've just been expressing your frustrations and just trying to help.

Mac said...

No problem Cocameister - I am not easily offended I think, and the way I am trading, nothing can hurt. I really don't use too many other indicators on regular charts than price and volume, but I should probably look at divergences a bit more. Thanks for the tips and good luck.

Zen said...

Mac I feel ya man. You are speaking my experience as of late to a "T". Seems like I used to be a good trader... these days I'm apparently out of touch, too. Just wanted to say you aren't the only one out there.

Today I managed to hang on to my longs but it is because I gave a little more leash to them. They ended up green but not by much.

Dani said...

Hi Mac,

Your comments are always welcome. Everybody has bad days. Actually probably most of the people has bad days these days...

I also like to use some indicators that tell me when to get in and when to get out, but above all, I trust the 10AM rule like the bible.

It's written in so many books that I'm sure there are plenty of traders waiting for that time to change the trade direction. That causes an inflection point at ~10AM every day. Many times a reversal, other days just a small swing. In any case, a safe trade most of the times.

Just as a tip for whoever doesn't know about this tip or how to trade it:
- if day starts with gap down, expect a retracement to close the gap or part of it most of the times
- I follow the S&P futures (ES) for the support/resistance points
- this morning the retracement when to a major resistance (ES 841.5)
- the trick is to know when it's going to stop. Today it coincided with the first $TICK above 1000 (overbought) at 7.10AM which is usually a great signal
- additionally, MACD 1min gave a signal as well.

This trade with FAZ would take you from $10.8 to a double top (in the min chart) at $11.6.
Just keeping the stop below the previous low (11.11AM - $11.4) and get in a bit above the low, this was a good >3% in 1h.

Hope that helps someone!

Mac said...

Thanks folks - good comments all around.