Thursday, April 2, 2009

State of the Market - 4/2/09

Another big day for the bulls today on Wall Street, as news of the suspension of the mark-to-market rule (which I mentioned on this blog at the beginning of the week to watch for) caused a massive rally right from the open. Stocks gapped up and did nothing but continue to climb from there, only pausing briefly from time to time to rest. They topped out briefly around 1:00, and spent most of the time moving sideways into the final hour. From there, things fell apart a bit in the last fifteen minutes, with the indices breaking some intraday support to the downside and closing in the middle of their intraday range. Volume appears to be heavier.

Technically, both the S&P and Nasdaq broke above the resistance levels I mentioned last night early on and stayed above those levels for most of the day, but the late swoon took them right back to those levels. We'll have to see what tomorrow brings with the jobs number, but with us being quite overbought (back over 200 on the McClellan) I am very hesitant to expect much more upside here. I also found it interesting however that the XLF drifted lower throughout today and did not break to new highs along with the other indices. That is a negative divergence and we'll have to watch to see if that is a sign of impending trouble.

I did get short via a few inverse ETFs late in today's session - FAZ at $17.52 and SDS at $71.66. They are not huge positions and I am still mainly in cash, but I will contemplate adding more tonight after I go through my scans and if these work out. I did want to start a few positions today. I was away from my computer so I couldn't do anything anyway early on on the long side. Some of the longs I posted last night broke out nicely today but I don't feel comfortable chasing them here. I have missed this move to the upside but I am not too upset.

I have been thinking lately about the role a trader's conscience can play in trading. That may not make any sense, but I think my conscience has affected me recently. What I mean is that deep down I know that all of the stuff that been going on - the continued raping of taxpayers by our government to prop up these dead banks for instance and today the ridiculous suspension of mark-to-market today which basically allows banks to totally lie about their assets - is dishonest and wrong, at least from my viewpoint. I have a problem with it, and I think it is at least partly preventing me from getting invested here. I can't buy (figuratively and literally) all this crap they (the government) are doing and am therefore subconsciously refusing to go along with it. I don't know if this is the right response - it probably isn't - but is something I need to think about soon. I have to learn to find a healthy balance between respecting the market action and also believing in what I believe. More than likely, with the direction we're going as a nation, that will be a difficult task.

The close was not very pretty today and we'll see if it leads to more selling tomorrow. It seems to me like this market may be getting a little tired, and remember that basically it continues to be government intervention that causes the rallies we get. I have no plans to go long anytime soon, and will look to add more shorts in time if the ones I took today work out. I want to be patient however on that side because I know that I could easily be wrong and this market could continue to irrationally move higher. I am prepared for that possibility. Take care and good luck Friday.

3 comments:

ex_wirehouse said...

I hear ya on the consicence aspect of it. Hard to not let it affect trading, current rally seems to have a lot of momentum, NFA tomorrow should be big

seeer said...

Trade what you see, not what you think. Number one rule for me. :)

But, in this case after all of these government interventions what will push higher the market? Is there anything left in the government's pocket?

Boomer Angst said...

I'm with you, holding $FAZ. Market looks like end of bear market rally to me.

I do try to trade the market I have and not overanalyze it, but I hear you on the conscience concerns--I have similar ones.