Thursday, April 16, 2009

State of the Market - 4/16/09

Another strong day today on Wall Street, as the bulls fought back from a bad open and managed to push stocks up again for large gains by the end of the session. The first hour or so of trading had a negative bias, but around 10:30, stocks put in a low and climbed there way back to flat for the day by 2:00. From there, they moved sharply higher all the way into the close with the Nasdaq leading the way. Volume appears to be lower on the S&P and higher on the Nasdaq.

Technically, another higher high was put in today by both the Nasdaq and S&P, with the Nasdaq breaking to new highs for the year. So the beat goes on for the bulls, and besides being overbought, there isn't much to signal a possible turn coming. I still want to see volume increase on days like today (it did not on the S&P) and I am a little worried that there are now 43% bulls and only 34% bears in the latest Investors Intelligence survey. We'll see if that means anything at all - it may not. One more thing that I am watching is that we are approaching having only 200 stocks down more than 25% in the last 65 trading days. That is usually a sign of a possible turn as well. It may be coming, but I have no clue when, and it has already gone much further than I expected, so I am not going to make a guess.

The beat went on for me today - more terrible results and I continued to be very frustrated. SOLR broke out nicely this morning and followed-through from yesterday's action, so I let it have a little room. It got as high as $7.90 and I set my stop under yesterday's highs around $7.30. Well, because I owned it, it promptly sold off that follow-through and fell right back down, giving up all of its gains and hitting my stop at $7.27. I basically broke even on that trade but gave up a decent sized profit on the reversal. That was fun. Bottom line is the stock didn't act well today and I expected a lot more.

When I saw the financials gap up today I had the same feeling I had when I saw them gap down yesterday - to fade the gap. So as a hedge on my long position, I entered FAZ at $9.83 early in the session. I'll let you guess what happened. Stop was hit around $9.56, giving me a 2.88% loss. Fun stuff as always for my trading account. This turned out to be a blessing as it fell the rest of the session but bottom line is that I shouldn't have made the trade.

In addition to the poor results, I was so frustrated that I turned off my quotes for the rest of the day and missed some nice moves in stocks I was watching like GAIA and CAEI. I keep expecting to get my groove back but it is just not happening right now. It will happen eventually, but right now, I am making the same mistakes over and over and not adapting my trading to this market.

Since I continue to have little success right now, I will not be trading tomorrow. Sometimes as a trader you have to admit when you just don't have it, and right now I don't have it. With options expiration on Friday, that might be a good decision anyway. If I had longs, I would just manage them because this market continues to act in a bullish manner. Sure, we could turn here soon, but trying to guess when that will be could get you in trouble. Take care and good luck tomorrow.


Cocameister said...


Sorry, I'm back again...

Check out this weekly chart of the S&P from Matthew Fraley and Steve Nelson at They do a great job of combining Elliot Wave Theory with technical analysis.

This may help get you back on track. We are on the verge of completing major wave A of Primary Wave B up. Now, we should get a pullback in major wave B of Primary B. This would coincide with approaching major resistance at 875 and with potentially needing to set a right shoulder in an inverse H&S pattern on the S&P. Then the rally should resume to at least the 38.2% retrace at around 1000 which happens to be exactly where the 200 day moving average is right now.

Do you hold any positions overnight or do you strictly daytrade?

If you are willing to swing-trade for a few days then maybe you can position for some shorts now as we approach this key resistance OR because the intermediate trend is up (and the Russell, NAS, semi's, financials have essentially broken above necklines and are not even waiting and creating major pullbacks), start to position in some swing longs over the next several days to get ready for the wave C up (of Primary B) until S&P gets back to the 38.2% retrace (which should happen given the MASSIVE positive divergences on MACD that you can see on the chart).

Otherwise, this intraday volatility is just like a buzzsaw. I got chopped up a little on my daytrades today too. The thing that had my portfolio up nicely today were the positions I've held and ignored lately.

BTW, another great website that has been right on (regarding the trend and Elliot Wave) is Tony Caldaro's blog:

He pretty much called the bottom, and has helped keep me net long the past 6 weeks.



Cocameister said...


One more thing. Another site that has provided nice "roadmaps" is this:

His blog is free. And, he is launching his trading system tommorow or early next week which will signal to trade either ES or NQ futures long or short. Check out the performance graphs his has (click on the evil.rat tab at the top of his page).

fortune8 said...

I feel your pain.

Dani said...

I'm the 10AM trader that posted yesterday.
Today was another good example on how well the 10AM rule works. Just as I said yesterday:
- if day starts with gap up, expect a retracement to close the gap
- this morning the retracement when to 843 support on the S&P futures (ES)
- how to recognize it:
A. MACD 1min bullish divergence: low at 9.52AM and higher low at 10.55AM even though the ES made a lower low.
B. MACD 5min low at 10.55AM

Actually today both the MACD 1min and MACD 5min were at the top at market open which was a great confirmation of the pullback.

It was a great day for me just because the day followed the rules perfectly well: I got short as soon as the market opened, took profits a bit before 10AM, then entered long at 11AM when the bottom was clear and held it for the rest of the day.

Hope this helps. It's a great way of avoiding getting long/short too soon.

By the way, these things aren't mine. They're well explained in the famous book "Trading for a living"

Mac said...

Thanks Coca - I much prefer to hold positions for a week or so if possible, and I do if they work out right away. I will hold them longer than that if they act right. However, I do keep my losses very small so I have been knocked out of many very quickly. Again, I haven't adjusted well enough to this market with my strategies. Ideally, however, I would like to enter a trade and just manage it until my profit goal is met. I thought SOLR was going to work well, but then it reversed. I may have had my stop on that too tight as well, but when I get up 7%, moving my stop loss up to breakeven doesn't seem to drastic to me.

Dani - good work. It is hard for me to keep up with so many indicators because I am not at my computer all day. I have to check in every so often and therefore can't always time things perfectly. But I hope it keeps working for you.