Monday, November 23, 2009

State of the Market - 11/23/09

Same old story today on Wall Street - dollar down, stocks up. Futures were up big in the pre-market session and stocks did open strong due to positive news on home sales and of course the falling dollar. They stayed strong for the first hour or so of trading, with the S&P rising as high as 1112. Interestingly enough, 1113 was the high last week for the S&P. Perhaps because of that, stocks slowly drifted back from there, never able to regain their early momentum and finished in the middle of their intraday range, although with large gains. Volume was extremely low and likely sets the tone for what this week will be like volume-wise due to the holiday.

I did nothing today and am glad I did. Looking at my watchlist from last night's video, I see quite a few stocks that opened at or above resistance and looked like possible breakouts, only to reverse hard and probably frustrated a lot of buyers. Remember the article from last night? The action in stocks like KNDI, TSTC, PCLN, and to a lesser extent UFPT, IUSA, and RDWR fits the description of common setups that are perhaps being manipulated by the HFT traders. I have no way of knowing if this is the case or not, but all started the day at or near their highs and quickly reversed off those highs. Probably tomorrow they will all be up.

To be perfectly honest, I am really losing interest in this market and just haven't spent as much time studying charts and going through scans recently as I have in past months and years. Perhaps a part of this is the losing streak I can't seem to get out of, but part of it is that the market doesn't make sense to me right now and I continue to lack a feel one way or the other as to where we head on a weekly basis. If the writing or videos on this blog suffers or has suffered because of this, I do apologize, but it is what it is. There isn't a lot I can do about it. My normal analysis and way of looking at things just isn't working and I have yet to figure out the alternative method to use, or at least I haven't allowed my mind to believe that alternative method.

This week has the look of a total chopfest due to the very low volume so I will likely continue to do other things and remain totally in cash. I remain hopeful that we will get into a better trading environment soon but as of now, that good swing trading environment is not there, at least from where I sit. Take care and if you are trading this week, best of luck.

5 comments:

Jason said...

Listening to you mac, it seems as though you do understand the markets and that you are making the right trade...cash. No need to look for a different way to view the market, your viewing it right it seems. Cash is a position, nothing wrong with that when the time calls for it. looking at the big picture. we are overbought in an uptrend, shorting in this environment isn't the soundest decision, so sitting on your hands is the best choice. one day at a time, and so far you have been making the best decision.

Other than that the underlying market keeps dropping off while the indices march higher, the problems are still out there and if they remain its only a matter of when.

jeremy said...

Mac
I read the article you posted the other day from the position trader. I experienced the same thing recently and has negatively affected my portfolio. However I don't really understand what's going on. What kind of phenomena do you think it is ? Is this just a bunch of traders manipulating the stocks and making profits from it ? What do you think the impact to the retail traders like us in the long run ? thanks a lot

Mac said...

Jason - you are right - cash is a position. It just seems like cash has been the best position for a long, long time now because everytime it looks some trades are setting up nicely on an individual basis and then they never work. Something is different in my opinion.

Jeremy - I do think this market has changed - perhaps because of 2008. You have less big brokerages controlling things, and therefore it is very possible the one that was protected (Goldman) can now control things even more. The market really seems to be controlled by computers and program trading more than ever before as well - this is what the article was mainly saying. In the long run, and it hurts me to say this, but I think the game has become even more difficult for the smaller, retail trader. Things that have worked well in the past aren't working anymore, and it is up to the individual trader to find what is working or what will work for them. I myself haven't found that yet - I don't know how many out there have.

Anonymous said...

Not sure why everyone said they cant trade technicals...I missed the March rally but I did jump in last July and has been buying on dips...The trend is up. Are you guys looking at the charts upside down ? Volume is important but isnt the only key. Remember back in March, everyone looking for that capitulation selloff which never came and they are still waiting...S&P is up over 20% so if your trading portfolio is not up at least that much, i say you are looking at the wrong technicals. If we correct bigtime, your guys will be jumping in while I will be jumping out.

Jason said...

Anonymous is absolutely correct. The trend has been up, and the best way to look at this is a weekly chart where all these crazy days mean nothing overall. This is strictly from a technical point of view.

Aside from that, its interesting that when the majority of stocks close negative on many days, the volume is disproportionately weighted to the stock closing positive, and on other days there "is" more volume in the stocks closing positive, but more stocks closing negative. Add that to overall decreasing volume, and what we could have is no one really buying stocks, and we are all just trading amongst ourselves.

I have been seeing more people out of work, businesses closing, hurting, etc just in my own life aside from what I hear on the news. Where are all these people getting money to invest in their long term future when they cant even see how to make ends meet past next week. Bull markets end on large volume and fireworks, this is petering out like a bear market rally. Still overall, this is a bear market rally in the big scheme, and a sideways market for the past 11 + years. If sectors don't start playing catchup, then we are looking at a correction sooner than later. The market looks forward about six months from now, and from where I'm sitting, six months doesn't look to promising.

Also, if retail sales fall short this season, you'll be seeing prices drop, not because next year wont be better, but because this rally has been betting that this year will be better. And then the layoffs continue after the holiday season.