Sunday, May 31, 2009

Video - Weekend Stock Market Summary - 5/31/09

Hi traders. Here's a video for the upcoming week - basic thesis is that the consolidation so far has been very health and until otherwise noted, the bulls are in control and hold the strings to this market. We are right at key resistance on the Nasdaq and near it on the S&P so it will be interesting to see if the bulls can break this thing out and hold it. I say "hold it" because for some feeling, I have a strong fear of a bull trap here - the S&P has more than just the 930 level to deal with as resistance. I hope I am wrong, because the last thing I want is a whipsaw that takes us right back into a range. All of this is discussed in the video. I am off to get ready for game 2 of the NHL finals - go Pens!

To download directly, right click the above link and "save link as".

Friday, May 29, 2009

State of the Market - 5/29/09

We had a very slow day for most of the day today on Wall Street, with stocks closing with gains but trading in a tight range for the entire session until the end of the day when they ran things up into the close for some (pretty obvious to me) end-of-the-month window dressing. Volume looks to once again be lower, however, and that takes off some of the shine. All in all, quite the boring day even though the media will paint it as a great day.

Technically, the range still exists and until it breaks one way or the other, there isn't much to do. There is a slight divergence right now between the Nasdaq and S&P, where the Nasdaq is right at the top of its range while the S&P is lagging a bit and is farther away. Both of these consolidations look bullish and constructive overall, but until we get a breakout, I don't know that I would be entering any longs yet. Even a day like today is so deceiving with the low volume and late push higher - it seemed so contrived. Maybe we get a breakout Monday and we start moving higher. I still hope that we can just avoid a bull trap if we do breakout, because a whipsaw reversal back into this range would be beyond frustrating. I worry about this option as summer starts and trading volume decreases, making whipsaws much more likely.

Since it's the weekend, today's post is short, but I will be back this weekend with some possible ideas depending on how many I find. I've posted some charts this week and most look just fine and are still consolidating. Someone posted in the comments the other day about a catalyst being needed here, and that could very well be true. Unfortunately, I don't know what that could be and when it will happen. I'll be on the lookout as best I can and as I've stated this week, just try to be prepared regardless of what the market does. Enjoy the weekend, and go Pens!

Thursday, May 28, 2009

Looking for Possible Longs if We Breakout

As I stated in the earlier post, it is always good to be prepared during consolidation periods and that is what you should be doing right now - watching out for stocks that have consolidated nicely after huge run-ups in case we do breakout on the indices in time. Here are some I am watching, although to be honest, I wish there more setups occuring. Many of the really strong stocks of the past month and a half just continue to grind higher and won't rest. I guess that's good if you are in them, but it also sets them up for sharp pullbacks instead of nice, calm ones. I don't see that many nice bases forming, especially after a month long consolidation. Maybe I am just too picky. This weekend, I'll share some of the shorts I am watching as possibilities if we breakdown. Good luck Friday.


State of the Market - 5/28/09

After a big up day Tuesday and a big down day Wednesday, we got another up day today on Wall Street, as the bulls bounced back from a weak start to post nice gains. The trading however was all over the map and very choppy overall, and we are still stuck in this range. Volume looks like it will be slightly lower.

Technically, you know the numbers by now to watch so I won't repeat them. We're coiling here - Wednesday's losses were smaller than Tuesday's gains and today's gains were smaller than yesterday's losses. Anytime you get that type of pattern, an explosive move is a very good possibility. The tighter this range gets, the more prepared I will try to be for the move.

I will say that the longer this goes sideways and stays range-bound, the better it is I feel for the bulls. We've just had a historic rally through April and the bears really haven't been able to do much of anything with it. That isn't to say we still don't break down, but the longer the bulls goes holding things relatively steady, the better the chances are of an upside breakout. It allows charts to set up, it reduces overbought conditions, and allows the market to recharge enough to put in that big secondary move up.

Not much else to say right now - there are some stocks that are moving like these junior bio-techs (MAPP and OCLS) that I am sure day-traders are loving, but I haven't been able to have enough time at the computer during the day to play these. Just remain prepared with a watchlist on both sides and when the move comes, you'll be ready to play it. Good luck Friday.

Wednesday, May 27, 2009

State of the Market - 5/27/09

After a great day for the bulls yesterday, today turned out to be a total clunker, as stocks started selling off around 2:00 and continued to sell off into the close, giving back almost all of what they gained yesterday. Volume looks to be heavier on the Nasdaq, giving it another distribution day, but possibly lighter on the S&P. We'll have to see how the final volume totals come in - these could change.

Technically, the same thing I said yesterday applies today - we're in a range and today's action proves that even more. Again the numbers - 875/880 up to 930 on the S&P are very important, and 1665 up to 1773 on the Nasdaq are also very important. Today the Nasdaq got up as high as 1768 and showed good relative strength but reversed hard off that level. My guess (only a guess) is that we will now drift back down to test the bottom of this range, which should be very interesting. The 50 day moving averages are quietly sneaking up very close to those support areas previously mentioned, which will just add another layer of support in that area.

The more we test upside resistance and fail and the more we test downside support and bounce, the stronger those areas are going to become. I said last night that I am expecting a big move out of this range one way or the other, and the longer this goes, the more powerful that move will be. I wish I knew which way we go for sure, but I honestly have no way of knowing. There are bearish signs out there and bullish signs. I am just going to keep my options open and play the hand that is dealt by Mr. Market. The only result I don't want to see is a bull or bear trap where we break one way or the other and then just reverse back into the range, whipsawing a bunch of traders. With support and resistance so clear, I unfortunately do see that as a possibility.

I was stopped out of my QID position today around $34.87 for about a 4.5% loss, but am not too upset. These were very small positions and more test positions than anything else. It stinks to see the market reverse back down, but I just didn't adjust my stop properly and therefore paid the price. My SDS position, which is a little larger, is still on and remains the only position I hold now. Unless you are a day-trader, tight, range-bound markets like this aren't the greatest for trading.

That's about it for today. I showed you some possible setups on the long side last night, but after going through those, many look quite ugly now to me (GMCR in particular - an IBD stock). Meanwhile, some of the shorts on the watchlist (namely UMBF, MTB, LPHI, RGR, ARST, TSYS, and AIPC) look decent today, so maybe we do head lower here for a few days. That doesn't mean we are definitely in a downtrend - we have to get some confirmation before trusting that conclusion. Good luck tomorrow and take care.

Tuesday, May 26, 2009

A Few Charts to Watch IF Bulls Take Control Here

I am still not convinced one way or the other, but the title says it all.


No shorts yet, but there are some on the watchlist (DECK, MTB, CHA, CSTR, RGR, GME, LULU, TSYS, ARST, AIPC). Good luck Wednesday.

State of the Market - 5/26/09

A very nice bounceback session today from the bulls, as stocks opened flat but immediately took off as trading started, rising significantly for the first half hour of trading. They wedged themselves slightly higher from there into the lunch hour and continued a slow move higher into the afternoon hours. They pulled back a little as the final hour started but managed to hold on to the majority of their large gains for the day. Volume looks to be higher than Friday, but that was one of the lowest volume days of the year, so be careful comparing them. I would like to see above average volume on a day like this but it doesn't look like we will get it.

Technically, today was a very nice for the bulls but we are still in a trading range here and could continue to bounce around inside this range for a while. We saw a nice day last Monday too, similar to today , but the market went nowhere the rest of the week. The S&P held the 875-880 once again, but still has to get above the 930 area, marking its most recent highs. The 200 day moving average is also now sloping into this area, which will likely make this resistance even more formidable. The 50 day moving average is rising quickly as well into the 875 area which will likely add strength to that support level. As those moving averages come closer to converging, the bulls and bears are going to likely be having some major battles.

On the Nasdaq, the 1665-1675 area is still a strong support level and the 50 day is moving up there as well. The Nasdaq retook its 200 day moving average again today (third attempt in the last month) but until it climbs above 1773, I would still remain somewhat cautious. Financials didn't move all that much today considering the size of the overall gains, which is interesting. They also seem to be consolidating here into a tight coiling pattern.

Until we break out or break down from this consolidation, I don't know if there is much point in doing a whole lot of trading right now, which is a main reason I didn't put a video out this weekend. I posted last week that I had a feeling we are due for some sideways chop, and it looks like we are getting it.

Overall, this consolidation looks healthy on the daily charts of the indices in that it has come on lower volume. At the same time, I have seen some worrisome signs in individual charts so I don't think it is guaranteed we are just pausing here before moving higher. I know this is boring to say this, but I really do believe we could go either way here. When I try to predict what the market is going to do, I usually get myself in much more trouble than when I react to what the market actually does. Therefore, I am going to wait for the move and then react to it (although I still have my QID and SDS positions from last week whose stops have not been hit yet.)

Overall, I am hoping my scans start giving me some clues as to which direction this market's move will be. I do think a big move is coming - I am just not sure which way. If I find some clues in terms of how many setups I see on individual charts, I will share.

Lastly, I wanted to direct everyone to a great little booklet I found last night on Trader Stewie's website. I had never seen this one before, but I am glad he posted it because after reading it (takes about 15 minutes or so), I am glad I did. It is a great refresher on trading psychology and some of the typical mental mistakes made by traders. I would recommend it to anyone out there - after all, it's free too and is just a PDF to download - no email address or information to give out.

As you may know, I don't think I've been trading well so far this year and I have thought a lot recently about why. This little booklet helped in terms of refreshing my mental state and reminding me of the qualities a good trader must possess to be successful. It has very little to do with the system or style you trade, and a lot to do with how you trade it. This is one of the reasons I haven't traded much for the past few weeks - I just wanted to get away a bit and "refresh" myself so I can come back with a better mental mindset. Now that summer is close by and my work commitments lessen greatly for a few months, I am hopeful that I can get back on the successful path I was on last year.

Take care and good luck tomorrow. Go Pens.

Friday, May 22, 2009

State of the Market - 5/22/09

We almost had a bounceback session today on Wall Street, as stocks opened slightly higher, fell quickly, but then bounced back into lunchtime. From there, they basically moved sideways in a fairly tight range until the final hour. At that point, they tried to break out of the range, but couldn't and pulled back strongly into the close, finishing with small losses. Small caps underperformed on the day. As could be expected going into the three-day weekend, volume was extremely low.

Technically, a bounce today wasn't unexpected but as the late fade showed, it was very weak and has to be disappointing for the bulls. We are still in this range from 930 to 875 on the S&P and 1770 to 1665 on the Nasdaq and there aren't a whole lot of big moves to make as long as we stay in this area. I still feel we're putting a top in here, but tops take time so this sideways chop is probably a normal thing. A breakout is not impossible, but based on individual chart action among other reasons, I still expect the market to pullback a good amount over the next few months.

I didn't do anything today and am still sitting with my QID and SDS positions from Wednesday. I will continue to watch for short candidates and will try to get a video up this weekend, but right now I just don't think it is smart to trade a lot right now. If we rally a bit higher on very weak volume, I may put one or more test shorts on, but as of now I think waiting for a breakdown makes sense.

Enjoy the three days weekend and take some time to remember those who have given the ultimate sacrifice for you and I as Americans. When I watch the news and see what has transpired over the last year and a half with the economy and bailouts and greed and corruption in Washington and on Wall Street, I do get very frustrated as an American. However, the ideals of freedom and liberty that our Founding Fathers established over 220 years ago in our Constituion are universally attractive and good and will hopefully live on strong for another 220 years. We have our servicemen and women to thank for that. May God bless you all, either in service now or from the past. Take care and have a great weekend.

Thursday, May 21, 2009

State of the Market - 5/21/09

For the second straight day, we saw some selling today on Wall Street, as the bears got some follow-through on the bearish reversal day put in yesterday. Futures were down to start the day, and from there the market declined rather steadily and deliberately throughout the rest of the session. There were very few bounce attempts at any points, and the ones that did take place were quite brief and lacking any power. There was a successful attempt to push the indices off their lows into the close, but they still finished with rather large losses. As of now, it looks like volume will come in lower, which avoids another distribution day.

Technically, the short-term moving averages were broken to the downside today so there is no way to paint this day except with a bearish brush. The only hope the bulls hold right now is that 875 and 1665 are still holding as support. Both indices came close to touching that level today, and I could definitely see one more bounce around there just to frustrate some bears,. However, I don't expect it to be strong and it would probably just be a chance to put some short positions on. It is possible that we are forming a descending triangle on the daily charts of the S&P and Nasdaq, but with the damage being done to leaders right now, I doubt that will be the case. Just like last night, until we break through the support levels the bulls are in control but when days like to today start happening more often, the tide is usually turning.

One hopeful sign for the bulls is that the financials showed relative strength today and were barely down, but with other areas showing major weakness like commodities (which has really been the leading sector in the last week or so) that relative strength may not matter either. I saw some breakdowns in individual charts I've been watching this week from the commodity sector like PCX and GTLS that have me very cautious right now.

Of the short candidates I posted in the video last night, some had nice breakdowns (LFT, WYNN, STRL, BBY, DRI, GME, and QSII) while a few did absolutely nothing or rose a bit (BKE, TSYS). If I continue to get more setups on this side of the market, that will be another sign from where I sit that this market is topping. I would pay particular attention to QSII, which is nowhere near shortable here, but based on volume looks like it could be putting in a major top around here. Watch for a right shoulder to form over the next few weeks.

Overall, we are in a situation where, sitting near support, the bulls have to step up soon or this could turn into something much more serious. I can't say with 100% certainty that we have topped until we see what happens on a break of the support levels right below us, but it certainly looks like we are at least in the process of doing so, which could take one or two more weeks. I would continue to stay very cautious on the long side here, and keep my eye out for developing short plays. Good luck Friday.

Wednesday, May 20, 2009

Stock Market Video - Wednesday Market Summary - 5/20/09

Hi traders. Here's a short video going over some of the "warning signs" that I see popping up with this market and why I am recommending caution on the long side. Now, today is not the end of the world for the bulls. Heck, the Nasdaq and S&P are still above their 9 day moving averages. However, when you start seeing things like heavy volume selling and leading groups top out, along with loads of bullishness in the crowd, you start to become cautious. I included some short candidates to keep an eye on, although again I would not recommend just jumping full-blast into the short side here. If we are topping it will likely be a process, not an event.

I also forgot to mention in the video that if you are still looking for long candidates, gold stocks look decent after today - LIHR and AUY are two to focus on. Good luck Thursday.

To download directly, right click the above link and "save link as".

State of the Market - 5/20/09

Quick post today as I am working underneath the sink trying to get all of our plumbing put back together and the way it is going, I may need a few more trips to the local home improvement store. Today started out very nicely with the bulls pushing the market to nice sized gains in the first hour of trading. However, around 10:30, the indices started to reverse and ended up pulling all the way back to their opening levels. From about 12:00 to 2:00, the market tried to bounce, but really couldn't do so and when the final hour started, stocks started selling off again and finished at their lows for the day. The losses weren't huge but when you consider how much they lost off their highs earlier in the day, it was not a good session at all. Volume was considerable higher today as well which adds another distribution day to the count across the board. Also not a good thing for the bulls.

Technically, I mentioned yesterday that the Nasdaq and S&P were both approaching the trendlines they broke to the downside last week, and the morning rise took them just above these trendlines. Of course, from there they reversed and the pattern on the daily doesn't look very good. It does look like those trendlines will now act as resistance. The Nasdaq came very close to touching its recent highs around 1773 (got as high as 1767) and the fact that it couldn't bust through and reversed very close to those recent highs is also not bullish. Until we get a break of 1665 and 875, I don't think it is guaranteed that this is the start of a major move lower, but I am definitely leaning that way. A break would confirm a major correction in my opinion.

Two other bits that have me thinking bearish here is that the VIX put in a major reversal today on the daily chart. It was down over 7% early on today, which seemed a little much for the size of the gains at that time, but finished slightly higher for the session. This could be an important event. I also was looking at the most recent Investors Intelligence survey this morning and saw that bears are now at their lowest percentage in about a year at 29.1%, while the bulls remain at a high percentage above 40%. This is not bullish either and could indicate a good amount of complacency right now. I guess it was ironic when I saw the headline "As the VIX continues to drop, Is S&P 1,000 far off?- CNBC" on Yahoo Finance this morning.

After sitting out most of the past two weeks, I made two trades about middday that I posted on Twitter. I went into QID twice around $36.50 and SDS twice around $57.70. I plan on holding these until the market breaks to new highs. There is no guarantee they work, but I think the risk/reward is decent here. Right now, although I am still not planning on loading up on shorts, I am definitely going to keep my open and focus more on that side of the market. I will try and get a video up tonight with some possibilities.

Right now, I think we have two possible outcomes over the next week or so. Today will either be meaningful and mark another reason to expect a major pullback here or it will just mark another move that will confuse and frustrate most of the traders out there (me included) and the chop in this 1670-1770 area will continue. One day doesn't mark a top, but with distribution continuing to pop up over the past few weeks, the signs are starting to line up in agreement. I would be very careful in starting any longs right now, and will watch the short side very carefully. Good luck Thursday. Back to work.

Tuesday, May 19, 2009

State of the Market - 5/19/09

We had a slower day today on Wall Street, as trading was choppy for most of the day and the indices didn't move much at all. The market started basically flat, fell quickly, but then rose sharply again at 10:00. This pullback/take off action continued for the rest of the session, until a late pullback caused stocks to finish basically mixed on the day. Volume once again looks quite low and that is a little weird - two days in a row of very low volume. It was slightly higher than yesterday on the Nasdaq but overall volume has been well below average the past four sessions.

Technically, we're basically still stuck in a little range here and I am not planning on making any large moves until we move out of it one way or the other. 875 and 930 are the numbers to watch on the S&P. It is looking very possible that 930 level will be challenged since the 200 day moving average is coming down into that area as well. The Nasdaq did climb back over its 200 day moving average today, but I can't say that it has really "claimed" it as it looks basically still like a battlefield. A move above 1773 would put it well above the 200 day and confirm in my opinion another leg in this rally. Interestingly, both the S&P and Nasdaq look to be challenging the bottom trendlines they both broke through to the downside last week. I am interested to see if they can break through or fall back here after testing those former trendlines.

I kept my eye on a few names today but really wasn't that interested in what was happening or making any moves. I thought long and hard about GTLS, which broke out above a decent flag patttern based on earnings and has good IBD ratings, but I ended up passing. I just still don't feel this market one way or the other right now. I think we are likely to chop for a little longer here before the next trend emerges.

I have to go as we are getting ready for new countertops tomorrow but if I find anything interesting in the scans, I'll try and share. Good luck and take care.

Monday, May 18, 2009

State of the Market - 5/18/09

A nice day for the bulls today on Wall Street, as a better-than-expected number from Lowe's boosted stocks at the open and they did nothing but run smoothly higher for the rest of the session. All indices put in major gains, with the small caps leading the way. The only problem with the action today is that unless we get a big push late, volume was significantly lower than Friday, and that was not a heavy volume day either. It was almost shocking - as of 4:00 when I am writing this, the S&P looks poised to have its lowest volume day since January (unless it trades 3 million shares in the last 20 or so minutes.) Not exactly what you want to see on a 3% move higher. Again, maybe these numbers improve on the final totals as we did get some short-covering into the close.

Technically, the bulls bounced back today nicely, getting back up to the 200 day on the Nasdaq and above some resistance around 1700. It looks like it will close above its 200 day, but just barely. The S&P climbed above the downtrend slope of this small pullback it had last week and that is bullish. 1773 and 930 are the next numbers to watch on the Nasdaq and S&P respectively. That 930 number should be interesting as the 200 day moving average is coming down very close to that number as well and the S&P has yet to test that moving average. To the downside, the 875 and 1665 numbers I mentioned in the video have been established as even stronger support based on today's action, and if those numbers do happen to break, I think it would be a very serious event.

After today, the bear flags I mentioned as possibilities this week on the Nasdaq and XLF look a little less menacing. The XLF bounced nicely today and is back above its 9 day moving average. Upside resistance there is probably not until around $13, so maybe the financials can run a bit. Retailers bounced back nicely but volume was pretty low. Watch the RTH right around $80 and see how it acts. There are a TON of retailers that report this week so I am guessing the news will guide the trading.

Although I put quite a few short setups on the video this weekend, I am glad I didn't enter any on Friday. I've been trying to be very patient recently after stupidly fighting the trend through April and continuing to try and catch a possible top from the short side. After looking at the past two weeks where we really haven't gone anywhere, I have to say I am happy in cash.

I was thinking today about a quote I read from Dan Zanger sometime in the past about how money is really made in the market only a few times during the year. Most of the time is just chop and random movements, but if you can catch the few smooth trends throughout the year as they occur, then you are set. When I thought of this quote, I thought of this market. So far this year, we have had a pretty smooth decline from February to March, and then a pretty smooth uptrend from March to April. Aren't we due for a little chop soon? Is it really going to be that easy for the uptrend to just keep smoothly going higher or for a downtrend to start and just smoothly go lower? I don't know for sure, but that is something I keep thinking about. Maybe that feeling is what is holding me back from making a lot of moves here. To be honest, I am kind of expecting a period of some choppy trading here, especially with a lot of the earnings out of the way except for retailers. As such, I think I will likely continue to be extra cautious putting new trades on unless they are earnings-related or just really great setups.

Overall, this weekend I said the bulls were still in control (barely) until those numbers were broken and today, they put a much firmer grip on that control. The downside support numbers are now very clear, and as long as they hold, I don't see any reason to focus on the short side. A lot of those setups from the video are still possibilities, but I have to see some confirmation of a downside move before doing anything. On the long side, there are some still decent patterns out there, but I gotta see some volume come in before going long. That is the reason I passed today on patterns like AIMC and RCRC - no volume. I will keep my eye out though and watch for earnings plays, which for some reason I keep passing on. Patience is important in trading and I think that holds true now. Take care, good luck Tuesday, and go Pens!

Saturday, May 16, 2009

Video - Weekend Market Summary - 5/17/09

Hi traders. My newest son is getting baptized tomorrow so I wanted to get the video for this weekend done a bit early. As I talked briefly about on Friday, I am starting to see a lot more possible short setups in my scans (which I go through in the video) so I am leaning more bearish as we go along here. The bulls have technically still held the 875 and 1665 areas however, so they are still in control, but a lot of the things I see indicate they are very likely losing that control here. I am not in a hurry to get massively short, but based on the setups I am seeing, I may look to play a few breakdowns in the coming week. Hope the video helps you out and feel free to ask any questions or share any comments. Take care and enjoy the rest of your weekend.

To download directly, right click the above link and "save link as".

Friday, May 15, 2009

State of the Market - 5/15/09

After a brief bounce yesterday, sellers came back today as after an up move to start the day, stocks sold off steadily from around 11:00 on and around 3:00, things looked bad as the S&P flirted with key support. There was a bounce, however, into the close finished with relatively small losses. The Dow and S&P were a good bit worse than the Nasdaq, which outperformed for the day. Volume was lower - I thought it was options expiration today but based on volume, I was wrong.

Technically, it looks like we will have a test of key support at the January highs on both indices now. The Nasdaq hit 1665 earlier this week and did bounce, but the S&P never got down to the 875 area. It did today and we have all of the indices now sitting on those key support levels. A bounce is still possible, but the longer it takes to develop, I believe the weaker it will end up being. I expected some stronger efforts by the dip buyers this week and we didn't really see that much at all. I am also seeing what look like bear flags setup on the financials and the Nasdaq which are ominious if they keep forming. The pullback on the S&P looks a little better. Either way, a break of those support levels will likely signal another move lower in this pullback.

I was away from my computer for most of the morning and I remain in 100% cash, as I still want some confirmation on where we head next. Based on what I said above, I am starting to lean more bearish overall but am waiting for more setups like SYMC (which looks really good) for instance before getting heavily short. I know this is boring, but sometimes waiting is the best play. If you are bearish, perhaps another or two days of weak volume to the upside would be just the ticket to set up some nice bear flags on individual charts. Meanwhile, if you're a bull, I think you better start hoping for some buying power soon before this rally drifts away.

Take care this weekend and I will try and put a video up depending on what I find in my scans.

Thursday, May 14, 2009

State of the Market - 5/14/09

We saw a bounceback session today on Wall Street, as the bulls stepped up and held important levels of support, pushing stocks to decent sized gains. The day started slightly higher, but then stocks quickly fell. This is where the dip buyers came in and lended support, and from there, stocks rose steadily throughout the rest of the session, particularly on the Nasdaq and small-caps. Both of those indices outperformed today. There was a pullback into the final hour, but stocks still closed with gains. The main negative today is that volume appears to be a good bit lower than yesterday, not what you want to see if you're a bull.

Technically, since those support levels around 1665 and 875 held so far, I have to say the bulls are still in control, but as I said last night, they're still in the ICU. Until those levels are broken and volume starts coming in heavier on the selling, I think I have to keep that mindset. From here, I will be watching the 9 day moving average to see if it acts as resistance or if the bulls can reclaim it and reestablish this uptrend which is in doubt after yesterday. 1700 on the Nasdaq looks like pretty formidable resistance on the 60-minute charts, so watch that carefully as well as 900 on the S&P.

I stayed in cash today - just don't feel it yet. My top possible plays on the long side right now are CSIQ, PCX, BAC, and RCRC, yet I didn't see quite enough strength in any of them to jump in today. One of the things I am working on as a trader is my patience, and this is a time where I still think patience may be a virtue. If we are putting in an important top, it likely will be a few weeks process. Most meaningful tops are. If this is just a pullback, the strength will reemerge and offer chances to get in for another move higher.

That's about all I got for today - I keep looking for clues but right now I think the market still could go either way. However, I didn't like the fade late today and compared to yesterday's selling, the bounce today was not that impressive. If I happen to start finding more compelling short setups in my scans, I will likely begin to lean that way. Good luck Friday - be careful with options expiration.

Wednesday, May 13, 2009

A Few Quick Thoughts

Well, volume was higher on the S&P, giving it another distribution day, but lower on the Nasdaq. Either way, IBD did put this rally under pressure and I would have to agree with that assessment. It isn't dead yet, but it is in the ICU unit and needs help quickly to recover. That being said, I am seeing quite a few confusing things right now.

Going through my scans, I don't really see a lot of short setups that I like. I see a lot of stocks that have broken above strong resistance levels and are now pulling back quite sharply. I prefer to short into resistance and then get out if it breaks above the resistance. If this is in fact the top, I think we are going to have quite a few "V" tops (upside-down v's, that is) just like we had so many "V" bottoms in March on individual stocks. For my personality, those are hard to trade because I don't like to chase stocks up or down. We'll have to see if it plays out that way or not. One possibility is that a lot of "heads" are being formed right now on possible head and shoulders patterns with these sharp rises upward followed by immediate moves back down. That would require however a little back and forth action and a little bounce for probably another two or three weeks in order for the right shoulders to be formed.

The one thing that I am still a bit confused about (and this is what is holding back my bearishness) is that volume is still very low on some of these pullbacks, which should be bullish. Using BAC as an example (and there are others like it), there was absolutely no volume on the selling the past three days. It makes me a bit suspicious, but maybe it is so obvious that it actually is bearish. Who knows right now?

My gut tells me that the bulls or the government may have something up their sleeves over the next few days, especially with option expiration Friday, so I wouldn't be surprised of a bounce soon. If we do bounce, I don't know if I will play it on the short side - I really just don't know right now. Last week, I said I was looking for a pullback and would assess from there. The problem for me is that this pullback has not been quite scary enough with volume to convince me this is for sure the top, but it has also been a little sharper and quicker than I was looking for, casting doubt in my mind if it is buyable. To be honest, I am not sure what I am going to do or which way I am leaning. I am pretty neutral right now I guess.

I'm probably rambling a bit here and don't know if this will help anyone out there, but I just wanted to get some thoughts out. If we break more tomorrow, you can probably pile on some shorts but I would be quick to take profits as I think we'll bounce soon after that, at least for a little bit. On the long side, these pullbacks may work but I would certainly keep my stops tight as another day or two like today is certainly not out of the question. Basically, I think things are still up in the air. At least my Pens won a great game 7. Good luck Thursday.

State of the Market - 5/13/09

We got a pretty serious session of selling today on Wall Street, as stocks started the day lower on poor retail sales and continued in that direction for the rest of the session. The market gapped right to the short-term support around 900 and 1700 and bounced briefly from there, but it couldn't hold and they fell further from there. From about 1:00 on, they moved sideways in a consolidation pretty much into the close, as the bears could not push their luck too much and had to settle for the big losses already in place. As of now, volume looks like it will be lower however, which would avoid another distribution day. I have to check to see if we get a big push into the close.

Technically, I said that 1665 would be a possible area of support (maybe the last area of support) on the Nasdaq and it would be important to hold that area. It looks like the bulls did hold it, but just barely. Any further selling in this area would likely lead to a much more severe pullback, possibly down to around the next level of support near 1600. The S&P never got low enough to test 875 and that is still a key area to watch. Right now the S&P is sitting right on its 20 day moving average which has held the entire rally so far. If that breaks, much like the Nasdaq, we are probably looking at a more severe pullback. Right now, the 50 day is around 825, so that is an area that could act as support next. The XLF did get as low as $11.10 today, but bounced back from there and it looks like they will close right above the $11.30 area that is important support. Retailers however broke down hard as expected on the news and look very toppy.

With volume coming in lower once again, I still can't write off the bulls yet, but they need to step up quickly. While the lower volume on this selling is a positive, two negatives that I see today are that a lot of the momo plays I showed last night that were consolidating fairly well broke down today and look much uglier. The only ones that I really like as of now are CSIQ, MRT, RCRC, and RUTH. Breakdowns like SRZ, FITB, CENX, BJGP, JASO, and even BAC are not good signs for this being just a quick pullback. In addition, the McClellan Summation that I showed last night is starting to indeed turn lower. It did not cross below its 9 day moving average yet, but it looks like that will happen soon. That would be bearish as well.

Overall, let's see how the final volume comes in but right now we are definitely in an area where the bulls have to step up or this could quickly turn from just a pullback to a full-blown correction that could move much lower. I am glad I didn't buy any pullbacks today - I was tempted though - and will now watch to see if the bulls come to play. This is what probably a lot of traders have been waiting for and it will be interesting to see if dip buyers come in to play here. Either this is a really great time to buy or the last chance to get out before more trouble comes. One more day of heavy selling will likely give us the answer. If that happens, I will turn to shorting stocks that have had heavy volume breakdowns the past few weeks. I didn't find many setups last night on the short side - maybe I will find more tonight. If I do, I will try and post some, although it's game 7 between the Caps and my Pens tonight, so I will have some other things to do. Take care and good luck Thursday.

Tuesday, May 12, 2009

Video - Tuesday Market Summary - 5/12/09

Wanted to put a video together tonight as I think the next couple of days could be important. Right now, the market is consolidating and pulling back and relatively speaking, the pullback has been healthy. We've had some distribution, including today, but the volume today was nowhere near extreme. I have some numbers to watch on the indices that should be important as well as some plays for both sides of the market - keeping my options open right now. Good luck Wednesday.

To download directly, right click the above link and "save link as".

State of the Market - 5/12/09

A choppy day today on Wall Street, as stocks started lower, slowly drifted down to test some short-term support levels, and then started bouncing sharply starting around 1:00. That bounce ran into the close as stocks finished basically mixed. In an exact opposite scenario from yesterday, the Dow and S&P outperformed the Nasdaq, which was down a large amount for most of the day. As of now, volume appears to be a little lower but I will have to check out the final totals. If it comes in heavier on the Nasdaq, it would be another distribution day so that is something to watch.

Technically, the 20 day moving average was tested on the Nasdaq and it looks like it held, so that is good for bulls. The lows of today around 1696 should continue to act as short-term support and as long as it does, I don't think the bulls have too much to get nervous about. The S&P held its 9 day moving average around 900 today and as I said yesterday, I think it can pullback to at least 875 without the bulls getting worried, as long as it comes in on lower volume. It looks like that's what happened today, although again, I have to check on the final volume.

The oscillators I follow haven't changed too much recently, and the VIX is still holding that bottom trendline of the descending wedge I showed this weekend, but I did notice that the McClellan Summation Index (T2118 in Telechart) is starting to flatten out a bit,. That is something I am going to keep my eye on here. Throughout this entire bear market, this oscillator has timed tops relatively well, and I will be watching for a cross below the short-term moving averages here. I will try to get a chart up later if I have time.

I would personally still prefer to see a little steeper pullback here in terms of getting long, but the past two days have been somewhat constructive so I will continue to keep an eye on some stocks for possible entries on the long side given that we don't see any really heavy selling. A few tried to breakout today (COIN, FSIN) but I didn't buy anything. I am still in cash and don't feel I have missed much the past four or five days. There is still quite a battle happening at the Nasdaq's 200 day moving average, and as I said yesterday, I would rather just let the bulls and bears battle it out there and then jump on the side of the winner.

Bottom line is that it looks like the markets may finally be consolidating a bit and so far, it has been in a relatively healthy manner. That could change tomorrow of course, but if this continues for another week or so, I think this market probably has even more upside to it. However, if we just start rocketing upward once again tomorrow, I still don't know how much further the market can go. It needs to rest, and perhaps that is happening right now. And as always, if volume starts increasing with more selling, then maybe the rest will turn into more of a nightmare. I am keeping my options open and wouldn't be surprised at either occuring. In the meantime, there isn't a whole lot to do except rest as well. Good luck Wednesday.

Monday, May 11, 2009

State of the Market - 5/11/09

We got another down day today on Wall Street, but with volume coming in low and the Nasdaq outperforming the other indices, I don't think the bears can start partying just yet. Futures were down pre-market and stocks did open much lower, but from there just mostly went sideways instead of having more losses pile on the opening losses. In fact, the Nasdaq quickly rallied all the way into positive territory and stayed there for most of the day. Stocks did close near their lows for the day except on the Nasdaq, but since most of the day just saw sideways action, I can't say it was a bearish day at all. Volume looks like it will come in much lower as well and that's exactly what you want to see on a pullback if you're a bull.

If you watched my video last night, nothing really changed today. If you're a bull, I think you have to be happy with a day like today. We continue to avoid the 300-500 point selloffs that became so commonplace in January and February of this year, and being as overbought as we are, one or two of those days wouldn't be surprising. Volume also looks like it was lighter today as well and that should also make the bulls happy. On the other hand, the bears continue to just not show much strength at all right now. They had a great opportunity last Friday to make something happen after some distribution Thursday and couldn't, and with futures down big today to start the week, they had another great opportunity to make this market pullback but once again couldn't do much relatively speaking.

Technically, the numbers I showed last night still hold true. In the very short-term, I will be watching to see if the markets can once again hold their 9 day moving averages like the Nasdaq did today. The battle for the 200 day moving average continues for the Nasdaq. Right around 1700 is turning into an area of possible short-term support, and I would watch right around 900 for the S&P where the 9 day is right now. That being said, I still think further pullback would be a healthy development for this market - maybe back to 1690 (20 day MA) or even 1665 on the Nasdaq, and around 875-880 on the S&P. If we pulled back to those levels on volume similar to today, then I may start looking at a few longs. If volume starts to increase, however, then I will stay away.

I do have to say that some of these low-priced high-fliers that have been all the rage lately are actually looking decent to me as they have consolidated rather well. I am not planning on jumping all over them, but if the market has a few more days of healthy pullback, then I would start looking at stocks like FSIN above $7.40, JRCC holding $19, PCX holding $8, NCOC holding $2, CSIQ holding $7.50, RUTH above $4.37, COIN above $2, MEE above $18.30, and MT above $30. Coal stocks in particular look decent on this pullback as most have come on nice volume patterns (heavy buying, light selling). I had a hard time believing that the gains these momo stocks have put in would last after they all shot up so quickly the past two weeks, but right now, a lot of the consolidations look healthy. That could change tomorrow of course, so I will continue watching these carefully. If you start seeing pullbacks as volatile as CBOU, then I would start worrying.

I am still in 100% cash and probably will continue to sit out the next few days unless we pullback a little further on lighter volume. I really do think that is the best play right now until this little chopfest resolves itself. Particularly on the Nasdaq, you can see how much of a battle is going on right around the 200 day moving average, and I will just let the bulls and bears fight in out there amongst themselves before playing the side of the winner. If we keep selling off tomorrow, keep watching volume - if it comes in light once again, then the bulls are still likely in control. Take care, and good luck Tuesday.

Sunday, May 10, 2009

Video - Weekend Market Summary - 5/10/09

I gotta go to a family dinner but I was able to put a quick video together looking at the indices in general and some areas to watch in particular. I still won't be doing a whole lot here but continue to look for a possible short to intermediate-term top being put in. The Nasdaq is still right at resistance and the S&P and XLF are quickly approaching what should be very heavy resistance. Good luck next week.

To download directly, right click the above link and "save link as".

Friday, May 8, 2009

State of the Market - 5/7/09

We had a bounceback day for the bulls today on Wall Street, as the stress test results that were already leaked and said that banks have to raise approximately $75 billion more to cover the government's worst case scenarios which is some cases are already present regarding unemployment were greeted with cheers from traders. The employment number was also better than expected, and that led to buying from the get-go. There was a brief pullback around 10:00, but the market righted itself and climbed basically for the rest of the session, although after lunchtime it was more of a grind higher that looked similar to consolidation. Volume was heavy and well above normal but not quite as heavy as yesterday's totals.

Technically, today is why I have given up shorting for the time being - you just don't know what is going to happen with all of this news and how the market is going to react. After a very poor day yesterday, the market bounced right back up today. I would much rather wait for a true breakdown and then short the bounce that would likely follow. The Nasdaq tried to regain its 200 day moving average today but couldn't quite do so, while the S&P moved slightly past yesterday's highs. I am watching the 945-950 area very closely on the S&P as it looks like it may move into that area, which also happens to coincide with the January high and the 200 day moving average. That will be a lot of resistance to overcome, at least it should be. As I stated on Twitter today, could it really be that easy for the S&P to turn at that point? The Nasdaq still hasn't really gotten over its 200 day.

One thing I want to call attention to is what I think may be happening on the Nasdaq. Churning is typically something you see close to tops, and is when stocks or indices have heavy trading volume but at the same time fail to make any progress in terms of higher prices. In six of the past seven trading sessions, the Nasdaq has had volume higher than its 50 day moving average, and in the last three of those sessions, volume has been very heavy. Meanwhile, seven days ago the Nasdaq closed at 1711. Today it closed at 1739. I guess that's a little progress, but when you look at the last three heavy volume days, the Nasdaq has gone from 1759 back to 1739. Overall, there hasn't been much price progress here so churning is something I am just watching for, especially given the heavy, heavy volume of the past three days.

It's the weekend so I am going to wrap this up but my outlook hasn't really changed. I am not chasing stocks here at such overbought levels and with the S&P quickly approaching heavy resistance, but I realize that the potential is there for stocks to continue to grind their way higher for a few more days. I will be remaining in cash, waiting for a pullback and assessing it as it comes, trying to figure out if it is just a pullback or a possible important top. Right now, I don't think there is much else to do. Enjoy the weekend and take care.

Thursday, May 7, 2009

A Quick Look at the Indices

As I sort of suspected, volume did come in very heavy today and all the indices definitely put in a distribution day. Now normally, one day of heavy volume selling isn't a death sentence to the bulls, but considering this one happened right near the 200 day moving average for the Nasdaq and also accompanied bearish reversal bars, I think this one day could have some significance. I am not ready to jump around and short everything in sight - in fact, I can almost guarantee I will do nothing tomorrow. However, on the charts below, I highlight some important short-term support than the bulls will want to see hold. If these areas don't hold, then things get more serious, especially if volume stays heavy.

S&P 500

Looking at the VIX, it is still in a general long-term area of support and is coiling in a falling wedge, which is typically bullish. If this would happen to break out higher soon, I would take that as another sign that a pullback is at hand, perhaps a serious one.


All this being said, the futures are up right now after the Stress(less) test results were released after-hours, so tomorrow will likely be very volatile. That's why I probably won't be doing much Friday. Today was bearish, but there isn't enough evidence yet to know for sure that this is a top, and I certainly still don't feel comfortable buying a pullback because we are still very overbought. I just have a feeling some traders are going to get chopped up tomorrow. Good luck Friday.

State of the Market - 5/7/09

The market that would not pullback finally did today, as another strong open was sold off for the first time in a while, and the bulls could not do much to fight back. Stocks sell steadily and strongly for the first hour or so of trading before moving sideways into and through the lunch hour. They broke down again around 1:30, but basically went sideways after that for most of the rest of the session before a bounce late took stocks a bit off their lows. Volume as of now looks softer on the S&P but heavier on the Nasdaq, but I don't have the final numbers, so that could change.

Technically, as I have been saying, a day like today was not unexpected and probably long overdue, but in reality, it wasn't really that bad. The S&P looks better today compared to the Nasdaq, which had heavy volume and looks like it logged a distribution day, along with falling below its 9 day moving average. A few days of distribution are not that big of a deal, especially after a strong rally, but I will be watching if we get more over the next few days. If the market puts together two or three of these days in a row, particularly on the leading index like the Nasdaq, then I would start getting very worried if I was a bull. If volume slows down on the pullback even if the losses are large, then it is probably not a big deal and is actually healthy. Short-term support for these two indices lie around 890 and then 870 for the S&P and between 1679-1665 on the Nasdaq. Particularly on the Nasdaq, that area should act as strong support - if it doesn't, then things could get uglier.

I pointed out yesterday the moves of the under $5 stocks seemed to be getting extreme and that likely some very volatile selloffs could be seen soon. If you look at a stock like CBOU, it definitely doesn't look good today. After doing a quick look at my scans, I know some of these stocks suffered some short-term damage, but overall I saw others that held up surprisingly well. Frankly, there wasn't nearly as much selling in these names as I expected given their dramatic moves upward. Perhaps they can consolidate a bit without crashing and then move higher after a week or two

Tomorrow should be interesting as we have the official stress test results (that everyone already knows about anyway) and the monthly jobs report coming out. I personally would still like to see more pulling back here, but the bulls are certainly not dead after one semi-bad day and it certainly wouldn't be surprising to see a bounce right back up tomorrow . I am still waiting patiently in cash and will do my best to play the trade that is given - either going long on a calm pullback or going short after a big breakdown and a feeble bounce. Either could happen. After doing my scans, I will probably have a better idea about where the market stands. Good luck Friday - I am off work so I may be posting on Twitter throughout the day depending on how much work around the house I have. Take care.

Wednesday, May 6, 2009

State of the Market - 5/6/09

The market that would not pullback continued today, as news of leaked stress tests spooked investors a bit early on, but as the session wore on, stocks bounced back and ended up having another positive day. Stocks fell after the open for about two hours, especially on the Nasdaq, but eventually found a bottom before lunch. They rallied for about an hour back to the opening highs, pulled back again slightly, and then broke to new highs again for the session around 2:00. There was another pullback into the closing hour, but another bounce into the close put the indices at the highs of the day. Volume looks like it will be higher.

Technically, there isn't much else to say that I haven't already said the past few days. We are very overbought in any number of ways, but the market just seems to shrug that off and keeps chugging higher. The top of this ascending channel on the Nasdaq is right around 1780. The S&P looks like it tried to break above the top of its ascending channel around 915 but just barely got above it. Typically these rising, wedging-type patterns are not bullish, but if we break out above these levels powerfully on strong volume, I guess theoretically it is possible for this rally to ramp up even more and go parabolic. That's probably the next step based on the indices and individual stocks. I have a hard time believe that would happen, but a whole lot of things that I have found hard to believe have already happened this year, so who knows?

I did nothing once again today as I know I can't chase stocks here but at the same time, shorting is a loser's game until the market tells us otherwise, and it hasn't told us yet. I am still looking for a relatively calm pullback to possibly get long from but if it doesn't come, then I will just remain in cash I guess. I cannot chase these parabolic moves in individual stocks, and in reality, I think that is what we are seeing in some situations. When you see the charts of CBOU and DDRX for example, I don't know how else you can describe what is happening out there in these low-priced stocks.

I don't know if low-priced stocks can have climax runs, as I typically think of those happening at the end of bull markets or after stocks have made year-long type moves, but right now, anything is possible I guess. I will continue to monitor these plays and see if they somehow consolidate. My guess is that they are going to get very volatile soon with some sharp sell-offs as that is normally how these things end. It just seems right now that you can buy any stock under $5 and in a day have a 20-30% gain. The low-priced momo plays are all the rage on the message boards and comment sites. When the market starts getting that "easy", it is normally a sign that things are about to change, at least historically it is.

We'll see what tomorrow brings - if the S&P happens to break out of this ascending channel, then 950 will be a key number to watch as it would put us right near the January high as well as the 200 day moving average. I still think we have to pullback soon, but I have been wrong virtually this whole rally, so maybe you shouldn't put too much stock into what I say right now. Good luck Thursday.

Tuesday, May 5, 2009

State of the Market - 5/5/09

Short commentary tonight because it is my wife's birthday so we will be going out soon and celebrating with family and the two little ones as well. Today looks like a pretty good consolidation day but I have to see how volume comes in. Right now, it looks higher on the Nasdaq and that would give that index a distribution, although with the lightness of the losses, IBD may not even count it as one. As long as the indices don't string together some days of distribution, then I think a pullback would be terrific here. It would allow some of these hot charts to rest and form continuation patterns that would provide much less risky entries than those out there now.

Technically, if we are going to pullback here (and we still need to), the areas of support to watch for are 875 and 860 on the S&P, and 1710 and 1670 on the Nasdaq. Now, considering how powerful and large this rally has been, I really don't think it would a problem for the indices to break through these levels and go all the way down to their 50 day moving averages. As long as volume comes in lower and the declines are relatively steady and calm, that might be a great setup as it could start a right shoulder on the S&P for a massive inverse head and shoulder pattern. That being said, any pullback we get could be very brief, so who knows?

That is my basic outlook - I am just going to wait for a pullback and then assess my options in terms of going long. I am doing my best to not short here because it has been a fool's game and unless we get some distribution, will likely still be a fool's game even with a small pullback. Too bad I am a fool and couldn't figure that out earlier.

I do see a lot of similarities right now between May 2008 and May 2009. I remember it well because I was making a lot of money trading stocks like CPSL and CAEI as those stocks were having very similar moves to what they are having now, although I am unfortunately not doing the same thing now. The indices had also put in a nice two month rally. Earnings plays like FSYS and ENER were working very well much like earnings plays are today.

The problem back then was that those momo stocks fell in the middle of May just as quickly as they rose, and that proved to be a sign that the rally was over. That's why I will be paying special attention to all these $2-$5 stocks that have been flying upward. If they consolidate in a healthy manner and don't give back too much of their gains, then I think the market has a good chance to keep going higher after a small pullback and maybe we have seen a major bottom put in. However, if you see these stocks start crashing, then watch out. Along with the volume on the indices, that's what I will be watching for. As weird as it is to say, they are sort of the leaders of this market move, and you always have to watch the "leaders".

Off to dinner. Good luck Wednesday.

Monday, May 4, 2009

State of the Market - 5/4/09

Another really strong day today for stocks, as the bulls gapped the market up at the open and just ran from there early. There was a sharp rise in the first half-hour of trading followed by a consolidation period into the lunch hour. Stocks did break support around 12:30, but that proved to be a bear trap as they bounced right back up into their consolidations, where they stayed pretty much at through the rest of the session, save the late bounce into the close. Volume was heavier than Friday and for the first time since 4/24, the indices all had above average volume, which is good to see.

Technically, we continue to be very overbought but it continues just not to matter. Both the Nasdaq and S&P continue to ride the top of an ascending channel and although these are typically bearish patterns as they can often turning into wedges, it just doesn't seem to matter right now. That being said, the top of these channels are around 1770 on the Nasdaq and 910 on the S&P. I will be interested to see if they meet some resistance around there, especially with the Nasdaq still right around its 200 day moving average. Financials sort of lagged for the first half of the day, but then moved quickly higher and also broke out of their month-long consolidation to the upside on heavier volume. This bodes well for the market, although who knows what will happen with the stress tests.

As I showed last night, I had a list of stocks that I was going to watch on the long side but I was not able to be at my computer today for the open and by the time I checked in around 10:00, the market was already up 150 points and I just had to sit back and watch. The problem with most of the stocks on yesterday's list was that most gapped up and made for risky buys. There was no doubt the move this morning was impressive and that most of the stocks on my list were breaking out, but I just could not chase there. Not with the market up eight straight weeks and very overbought. There just weren't any lower-risk entries from where I sat. Maybe I am trading scared. Perhaps I just need to put that thought process away for the time being, but it is hard to do. As I said last night, if get a long-overdue pullback and it is calm and orderly, then I will be interested in buying stocks. However, I figured buying stocks this morning on gap-ups in a very stretched market is a little desperate and will likely be a bad decision. It doesn't look like based on today, but things could change quickly. I did cover my ACM short at $26.09 for a small loss.

When the midday consolidation broke to the downside, I did enter FAZ at $7.89 with a stop below the high of the day. This move today just seemed a bit extreme to me given the overall move of the past two months and the overbought conditions out there, and when the XLF failed to breakout today on the morning move, I thought it was worth a shot. In hindsight, maybe my outlook was clouded by regret of missing good entries in the morning, but either way, my stop was hit at $7.71, giving me a 2.4% loss. Obviously my timing was wrong and I am still not giving this market and the bulls enough respect. Again, I am not saying we can't move higher, but eight straight weeks of gains followed by a huge gain Monday seems overdone to me.

We'll see what tomorrow brings - I still don't think I will be buying anything but shorting just isn't working right now so I have to respect that and may just end up being in cash for a few days. Some of you may disagree with my outlook and wonder why I'm not just buying things left and right, but I have to go with what I see, and what I see right now is a risky setup for new longs due to a very overstretched market. The time to buy was back in March and on some of the short pullbacks through April, not now. As always, I could be wrong and we may just continue to move higher into the summer. But I still have a feeling we are due for a turn soon, much like back in March. Every day it was down, down, and down, and then finally, one day it wasn't. I didn't start short positions back then when we were down so much, and I don't plan on starting long positions when we are up so much. For me, it is too risky. Markets don't go up forever, especially in a bear market. Trade accordingly. Best of luck Tuesday.

Sunday, May 3, 2009

A Few Charts to Watch and Some Introspection

Hope everyone out there is having a great weekend. Sorry for the lateness of this post - I was doing yard work today and hoping to cut the grass. Got about two minutes in, hit a small root, and my mower went dead. This is the third time I've used this mower - brand new Snapper. Even worse is that the very first time I used it, it did the exact same thing - hit a small branch and went dead. I returned that one and got this replacement but now, I think I will just a different brand. I can't believe a mower just stops working after hitting one root. What good is a mower period then?

Anyway, I thought of doing a video but with the indices up eight straight weeks, I don't feel really that excited about buying stocks here. There are some that are holding up very nicely and forming consolidation patterns, and I will show those below. This market keeps chugging along so you just never know. I'll also go over the indices and what things look like.

My basic outlook is that the indices still need to pullback before I would go heavily long because this is what healthy markets do. They don't run up without pauses, because that leads to exhaustion on the buyers side and then a quick fall. A slow, steady climb is what you want to see. So with many indicators at very overbought levels along with the Nasdaq right below its 200 day moving average, I'm not that interested in buying here. That MACD divergence is still present as well. At the same time, however, I realize we could continue higher like we have the past three weeks while at very overbought levels. If I play anything below, I don't know that it would be anything but short-term.

S&P 500

Here are some of the better looking setups right now - mainly longs but I put a few shorts in there too. I am not seeing that many short setups right now and I have to respect that. Meanwhile, most stocks are holding their gains very well and consolidating nicely. That is bullish action and I have to respect that as well. I would watch the solars in particular as they are approaching resistance. It will be interesting to see if the FSLR earnings report will carry over to the whole group.


What I also wanted to do in this post is get some thoughts out about my recent trading slump and what I can do about it. This is both for my sake, as I think it is very beneficial to look inside yourself a bit from time to time to see what you are doing right and wrong, and perhaps for the reader's sake as some may find it beneficial as well to see what a trader goes through sometimes from a psychological aspect. Maybe some of you have gone through the same thing. If it doesn't help, then I apologize for the rant.

To be honest, I have felt a bit unlucky recently because if you follow this blog, you know I have had some good ideas on the long side from time to time during this rally and have posted them here, but even when I went long, I have been inevitably choosing the wrong stock when faced with a choice between two or three. I have also been getting stopped out of stocks only to see them run up without me. It seems that for the past month or so, whatever I do is wrong. Then when you start seeing that happen, your confidence starts to wane and then you don't trade properly and then the cycle continues. As I've discussed before, this type of slump happens to most traders out there (if they say it doesn't they are most likely lying) because this is a very difficult job. For me, being only a part-time trader, it is even more difficult at times because of time constraints, especially with two young kids and moving to a new house. All of these are not meant to sound like excuses - they just are what they are.

That being said, I can't deny for a second that I have missed this two-month rally and that is mainly because I couldn't put my personal opinions aside and just follow what the market was doing. It is my fault and my fault alone I have not captured some nice gains during this rally. There were many gains to be had, and perhaps there are many more gains to capture in the next few months. But some of the typical pitfalls of trading got in my way and that is why I am where I am. I wanted to expand upon some of those here.

I believe I have no problems with the technical aspects of this market. There are always things you work on and look to add to your trading arsenal, but overall, I believe I can spot charts on the long side and short side well and rarely miss a big winner in my scans. That doesn't mean I trade them all (I wish) but I at least spot them and usually can catch a few winners from the lot. Likewise on the indices - I feel I usually have a pretty good idea about what is going to happen short-term on the S&P and Nasdaq. I knew there was a follow-through day on March 12 and that it could mean a new rally was starting. I am not a perfect technician, but the technical aspects of trading are not my problem. Right now, the psychological parts are the problem.

I think one of the biggest mistakes I have made recently is not being flexible in my thinking. It is ironic because that is something that I usually preach near the end of my posts when things look up in the air. But looking back now, I realize I have been very unflexible in my thinking and it cost me. I was so locked into a capitulation sell off scenario in early March that when it didn't happen and the market turned somewhat quietly, I refused to acknowledge a possible rally forming. This is ironic as well because I stated back in early March that the other option for the indices besides capitulation was just a quiet turn and a slow and steady rally upward that would be hard to see until later. That's what happened and I refused to recognize it. My ego and stubborness got in the way here.

I have also been so locked into the disappointment I have about what is going in Washington D.C. and on Wall Street in terms of these bailouts, rules changes, etc. This is what I have been talking about when I have mentioned my trading "conscience" the past few weeks. I feel so strongly that what is going on is dishonest, disgraceful, immoral, and unAmerican that I have almost subconciously wanted this rally to fail and fail badly so that their tricks could be exposed for what they are. However, once again, although those feelings I have are legitimate, they should in no way affect my trading and I have to get better in that regard.

It usually happens in trading that when you think you know it all, you learn a big lesson. Coming off of last year, I was pretty confident in what I could do this year - maybe too confident. I noticed myself not reading over some of my favorite books and not doing my scans as diligently. (The baby probably had a bit to do with that too) Mr. Market is always ready to knock traders down a few pegs when they get too full of themselves or too sure in their ways, and maybe that happened here. I know that I did get away from a lot of the things I normally do and believe in, and that has affected my trading, obviously in a negative way.

Overall, I am still confident that I can take this drawdown and learn greatly from it. I hope I can use it as a reminder to stick to my rules and not my opinions when trading. Drawdowns are part of trading but they can be beneficial if you learn from the. I am down about 13% for the year, which isn't a big deal and I still have lots of time to get that back up into the plus column. Hopefully I can be more open-minded, less biased, and get back to what made me quite successful last year. I know I regret missing this rally, but I am going to look forward now and hope for the best. So as you read my commentary over the next few weeks, I hope that you will find it more market based and less personal opinion based as I think that will helps us all.

With the stress test results being released later this week, I am sure things will be volatile. Overall, the market continues to hold up well, especially in the face of bad news (swine flu, C and BAC needing more funding, etc). You have to respect that - I've kept expecting a big selloff, but it just hasn't occured. However, after eight weeks in a row of gains, a pullback still would not be surprising at all. As long as the market doesn't sell off sharply and can hold support, even all the way down to its 50 day moving averages, then I think a pullback could be a good buying opportunity. If you're a bull, a slow, lower-volume pullback would let the stocks that have rocketed out of bases recently to digest their gains, setting them up for further gains when and if the market starts moving back up.

Now if we get a lot of heavy selling on a pullback and more distribution days and also see a lot of the charts I posted above break their consolidation patterns sharply to the downside, then maybe the rally we just had is it and we fall back into the jaws of the bear. I have no way of knowing which of those two outcomes will occur, but those are the two I am looking for and will do my best to play the one that happens properly. Take care and good luck next week.

Friday, May 1, 2009

State of the Market - 5/1/09

A very choppy and very boring day today on Wall Street, so boring that analyzing it doesn't seem to make much sense. The indices tried to sell off early, couldn't but also never really bounced, and the battle for the S&P right around 875 continues. It once again tried to poke its head above that level, getting as high as 880, but looked like it would close below it for the third straight day until a late (and I mean in the last three minutes of trading) pushed it slightly above. The closes for the past three days on the S&P are within 5 points of each other and on the Nasdaq the past three closes are all within 7 points of each other. If there was heavier volume right now, I would say we are probably churning right now, but volume appears to be much lower today, and that is usually a prerequisite for churning action. Maybe this is just consolidation.

I took one small short in AAPL this morning at $125.90 but that was the only new position for today. Still trying to take it slow. My stop was hit at $127.50 (it was higher than that however) giving me a very small loss. I will continue to look at this though as a short. My stop was hit in ADM at $26.35 in the morning giving me another loss. Earnings are next Tuesday so I would have gotten out anyway by Monday, but I should have paid more attention before I shorted it and just stayed away. I never like to go long or short into earnings.

It was nice to see HERO move 12% higher today without me as I was stopped out yesterday. I really must be missing something right now, because I looked again at intraday charts of HERO in several time frames trying to figure out if I should have not set my stop where I did. $3.07 was the breakout point and I bought at $3.09. When it moved up to $3.20, I set my protective stop under $2.90, figuring that a move that low (a drop of 10%) would definitely signal a failed breakout and that I wouldn't want to be holding it then. Really, is a 10% stop too tight? I guess it was. Volume was higher too intraday on the selling that took it down all the way to $2.83. The only thing I can see is that perhaps I should have paid more attention to the 9 day moving average and where it was, because that's where it looks like it bounced from. That happened four times in the last two weeks so maybe that was the sign I was looking for. I continue though to just be so frustrated.

I'll be back at some point with a more in-depth look at things although I continue to have a tough time reading this market correctly. I still think we are due for a big pullback but it still doesn't come so maybe I am just being stubborn. Take care and enjoy the weekend.