Saturday, January 31, 2009

Go Steelers!

First off, I got quite a few emails and comments in response to my last post. I wanted to say thank you for all of those - a lot of insightful thoughts and I appreciated it. I wanted to make sure everyone understood that I am not quitting or anything like that - I think I just reached a point where I know I need to step back and not trade for a bit. That could be a week or it could be a month. Right now, I am again hearing more rumors about this bad bank idea which I'm sure will affect the market next week. There are just too many of these rumors out there that are dictating trading and I can't take that anymore. Too much like Vegas out there right now for me. I'll still try to share some thoughts as I have them over the next week or two on the blog - I just don't know if they will be as comprehensive as normal - that's all.

Anyway, being from western PA, I am a huge Steelers fans and wanted to post a little video for any other Steeler fans out there to get you pumped for the game tomorrow. It should be fun - it will be a tough task to shut Arizona down but hopefully this defense can do it once again. Take care and enjoy the game.

Friday, January 30, 2009

State of the Market - 1/30/09

Do you ever feel like you are waging a personal battle against the market? Do you ever feel like whatever move you make, it will be the wrong one? That's how I feel right now after today. This commentary is going to be less market-based and more psychology-based. The market did break down early, but never really followed-through to the downside until the very edge of the day, and even then, it just kind of held there instead of really selling off. It was a difficult day to trade, at least for me. Not fun at all.

My frustrations with this market definitely continued today, as the early spike took me out of over half my short positions from yesterday with small losses. The frustrating part is that on a few, the stop was just barely hit and then the stock reversed hard without me for the ride down. That is probably the worst feeling as trader. I was away from my computer for most of the morning, so I had to set my stops and see what happened - I didn't have much choice. Let me tell you, it was not fun to see what happened.

My stop in UAUA was hit at $10.8999 (high was $10.908) and then it immediately reversed lower. I took a 3% loss on that one - not a big deal, but I could have been up around 12% later in the session. My stop in RRGB was also hit in the first minute or two of trading at $12.80 (high was $12.87), giving me a 2.2% loss. It reversed almost immediately without me. Again, the loss is not a huge deal, but again, later in the session, I would have been looking at a 7% gain. PNC was also hit at $35.11, giving me a 2.4% loss. That also reversed, although it moved higher at first. So once again, my read on these patterns appears to be correct, but this choppy market got me out of them prematurely and I did not benefit. I used trailing stops as well which supposedly can't be seen by the market makers, so I doubt they were trying to take stops out at the open, but who knows?

To add to the frustration, the one financial I did not get stopped out of only to see it reverse (JPM) just decided to stay higher all day. I was stopped out of that around lunchtime at $26.49 for a 2.7% loss. It was all over the place today - yuck.

Later on in the session, I did short ECA at $44.28 as it looked to be breaking through its 50 day moving average and a bear flag on its 5 minute chart. I once again got whipsawed there as it bounced right back up and stopped me out about an hour later at $44.77 for a 1.26% loss. It also reversed lower soon after my stop was hit.

The action of the past two days puts me down about 7% overall for the year - not a big deal and definitely something I can climb out of, but it is hard to deal with when most of my calls and reads on the market have been correct. It's not like I am shorting when I should be buying or vice versa - I have shorted when the market started turning lower and bought when the market started turning up and have absolutely nothing to show for it but losses.

Basically, this is the year has gone for me so far. Back on January 3, I was calling for a major pullback in the indices and told folks to not chase stocks. I went short some names along with FAZ at some point. I was stopped out early from FAZ and of the shorts I picked, only one worked (MR) while the others did nothing even though the market went much lower. Then around January 12, I was warning that a bounce was very probable based on what I saw, and so I entered both SSO and DIG at this time. My timing was a little off here, but the call was overall correct and we started moving higher a few days later, but I was stopped out of both positions way before that with small losses. Finally comes this week, when I have been clearly stating that we were due for a pullback here and here and that I wouldn't be chasing this government-induced supposed breakout. I got short some good-looking names yesterday that mostly did work, but I was shaken out of them early and now see only one out of six positions that gave me a gain.

As you may guess, I am somewhat frustrated right now. Honestly, days like today make me want to just quit this stupid game sometimes. I am not going to do that - I know it is all part of it and these things happen to every trader - but I may take some time off if it continues like this. My reads on the overall market have been pretty accurate I believe but I continue to carry this losing streak on despite of it. I don't know if there is luck involved in trading or not - probably a little to an extent - but if there is, right now all I seem to be having is bad luck, and I can't take that for much longer.

I know what I do need to do is look at how I am trading (specifically setting my stops in an extra volatile market) and change accordingly so that my correct reads will lead to profitable trades instead of frustrating ones. You never stop learning and growing as a trader, and perhaps this is my next challenge in terms of growth - how to manage this issue. I know controlling losses is the number one rule for trading, and I think I do a good job. My stops probably have been too tight on positions, but I do base them all on technical levels on intraday charts, so it is not like they are just placed randomly. What is happening is those levels I look at have been broken just enough for my stop to get hit, and then the action reverses without me. I don't know what to do about that. I think I need to figure it out before trading heavily again.

There is always debate about whether to use stops or not, or which type of stops to use. It is a tough question. It is easy in hindsight to just say, "oh, you should let your positions ride", but in this type of market, which is completely unpredictable, I can't do that. I would much rather wake up with a small loss of a few percentage points that have a loss of 10-15% after the market gets squeezed again on some new made-up rumor by CNBC. Days like today definitely suck, but I guess it is just part of trading. I am guessing I am not the only one who was stopped out of his shorts this morning - this market does a great job of frustrating as many participants as possible.

As it is, I am going to step away for a bit and not trade. As a trader, sometimes you have to be able to recognize this need and do it. I have one open short in ACM and will manage that, but I don't plan on adding any other positions for the near future. Basically, I think I've reached my breaking point. I don't know for how long I will stay away - I probably should step away for a while because with all of the rumors, volatility, and government interference, the game has become almost impossible to win in my opinion, at least for me. Maybe others of you out there are doing great, and if you are, congrats. Trading is a lot like poker, and right now for me, it is like trying to play a game of poker, but after each hand, the rank of hands change without the knowledge of the players that are playing. One hand, a full house is better than a straight, but the next hand, two pair are better than a flush. How could anyone be successful in that type of game? That's what we got right now in this market.

I need to let myself recharge, get some confidence back, and then maybe I will be ready to go again and get back to making money. But I kind of think right now if I try to keep trading, I will do nothing but pile on more losses and I definitely don't want to do that. Besides, my Steelers are in the Super Bowl so I can at least focus on that this week and hopefully enjoy a victory celebration for them (although I am worried about the game).

Sorry for the rant - sometimes it is necessary and theraputic to get thoughts out in words. I may be around and try to share some thoughts over the next week or so but if you don't see posts for a few days, you'll know why. This market isn't much worth writing a lot about for me right now. Take care and best of luck out there. Hopefully you'll have better luck than me recently.

Thursday, January 29, 2009

Video - Short Setups for Friday - 1/29/08

It's is definitely an adjustment going from one to two kids, and time has been at a premium, so it's been difficult to get many videos out. Just wanted to point that out for those that wondered where the vids might be. I did want to put some short setups out there for tomorrow and that's what this video focuses on. I am already short from today and tomorrow may not be the optimal time to short, but if the bulls don't make a stand early tomorrow, then I think we head lower and shorting will probably be the right play. None of my positions are full ones, so if they break down further tomorrow, I will likely add. If not, I will be out with small losses or flat on these positions and just continue to be frustrated. I don't know which of those outcomes to expect. Good luck Friday.

State of the Market - 1/29/09

Wall Street followed up yesterday's euphoria over more goverment intervention with a dud for most of the session today, as stocks fell at the open and continued lower for most of the day. There was a gap down to start trading and stocks moved lower for about the first half hour, but then bounced back up to challenge the opening gap before 11:00. That resistance held, however, and stocks fell from there steadily through lunch and into the afternoon. Around 2:00, a bottom was put in and stocks bounced for about 40 minutes, but could not bust through the lunchtime lows, and fell back into the close to finish at their lows for the day. The last half hour was just consolidation however, so we'll see tomorrow if we get more selling from here. Volume looks to be a little lower than yesterday, which takes a little sting away, but I don't have the final totals.

Technically, I have been saying a pullback was due and today we got it. It is not really that surprising because normally after Fed days, we get some reverse action of the previous day anyway, but it is certainly not bullish to see both the S&P and Nasdaq fall back below their 50 day moving averages the day after reclaiming them. They closed just barely below all their short-term moving averages as well. Maybe this will just be a slight pullback and we'll keep going higher, but as I have said ad naseum, with no leadership it is going to be very difficult. I think if bulls don't come back tomorrow with a strong day, then this will be a pullback that goes at least to the 800 area on the S&P. If that holds, then we will just continue to remain in a trading range. If it breaks, then I think we visit the November lows. I still see head and shoulder patterns forming on the indices, more so on the Nasdaq than the S&P.

Although I was not around a computer at the open due to some treacherous roads here in the northeast, I did enter some shorts later in the session. I took ACM short at $26.42, RRGB at $12.55, and UAUA at $10.61. Later on in the final hour, I entered JPM short at $25.81 and PNC short at $34.36, instead of playing FAZ which I had directly in the middle of my quote screen but I passed. I don't know why - hesitated around $45.20 and then it was too late. These were all smaller than normal positions due to my recent struggles - I always think it is a good idea to trade smaller when you are on a losing streak. I am trying more but smaller positions in hopes of having a better chance of hitting a winner.

I continue to be very frustrated right now just because I can't get anything going and it seems like whatever I do, it is the wrong choice. I don't think my reads on the market have been wrong, but inevitably I have been choosing the wrong stocks to play, or I have set my stops just a bit too tight, or I waited just a bit too long to enter a position which gave me too little of a cushion to trade properly. Today was a prime example, when I had a choice between RRGB and HIBB as shorts. Their intraday charts looked almost identical, and I went with RRGB based on its daily chart. For the rest of the day, HIBB fell nicely and RRGB just sat there and did nothing. That's how it seems to be for me lately. We'll see if these shorts act any better or if I will once again be out quickly with small losses.

As a trader, I think you are always going to have these type of tough times where things just don't go your way. It's part of the game. The key is how you deal with it. If you let yourself get too frustrated, you can end up making bad trades, overtrading, taking on too much risk, and getting yourself into even more trouble. I have done that on a few occasions and certainly am not immune to it. If you do things the right way, though, you have to believe you will be able to pull through those rough spots eventually and get back on the right track. At least I hope that's how it will work right now for me.

Hopefully you weren't chasing weak stocks higher yesterday and were able to get some shorts on recently. I have no way of knowing if we will fall further tomorrow - the GDP report will likely have something to do with that. To be honest, nothing would surprise me right now. My game plan is still the same - look for shorts and stay away from longs. If I have time later, I'll see about doing a video and show you some of these head and shoulders I see starting to form. Take care.

Wednesday, January 28, 2009

Very Weak Follow-Through Day - Lack of Leadership Continues

Today was technically a follow-through day according to IBD but just like almost all of the FTDs of the past year, I am thoroughly unimpressed. As I normally do on these FTDs, I checked out IBD's "stocks on the move" today and there were a total of five stocks listed that was up on 100% or higher than normal volume (RKT, GPRO, MTXX, NVO, GMCR). If that's the best this market can do, again, this "rally" is in trouble. If you want more evidence of the lack of leadership in this "rally", the IBD 100 was up 1.2% today. When you see that big of a divergence (the major indices were up over 3%) there is something wrong. On a sound FTD, you would see the IBD 100 up 4-5% when the indices are up so much.

Here are the indices - just wanted to show why I am not chasing any longs here and am still stalking the short side and waiting for the right time to pounce. Even if I wanted to buy, I can't find anything to even consider.

XLF
S&P 500
Nasdaq
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

I did lose some of the nice bear flags from my list today on this move higher but I am seeing some potential head and shoulders patterns setting up, just like the indices. Those are potential patterns, so it would take a drop to build the right shoulders on these, but I think that is a possibility.

All in all, I don't know if I will be making any moves tomorrow or not because as I said earlier today, they might try to paint this tape into the new month, but I will be looking for the right time to get short. Hopefully, my read is correct here. Take care and good luck tomorrow.

State of the Market - 1/28/09

We got another taxpayer-sponsored rally today on Wall Street, as news of another bailout via the formation of a "bad bank" caused a spike in the financials and led to short-covering in most other sectors as well. Futures were up big pre-market and did open higher. They pulled back for about the first hour and slowly moved higher through the session into the 2 o'clock hour, when the Fed released their latest notes. This release caused a quick spike to new highs, but as usual, the rest of the session was volatile as the news was absorbed. Stocks pulled back, spiked around 3:00, pulled back again, and then rallied back into the close, giving stocks large gains. Volume doesn't look overwhelming as of now but was definitely higher than than Monday and Tuesday.

Technically, the Nasdaq and S&P both closed above some important resistance today (although just barely for the S&P) which is good for the bulls. It would be nice however for the market to be able to hold a rally/breakout like this just once without the government (or should I say taxpayers) getting involved and sponsoring it. That's one reason I still doubt this move and don't plan on playing it. We are also definitely overbought now on some short-term indicators and the others I watch like the McClellan are getting there very quickly as well. Maybe this time will be different - maybe this will be the rally that sticks. But everytime we have had one of these rallies where we get overbought with very little leadership, they have quickly failed, and that's still what I expect to happen here.

I stayed out of the market for most of the day today until the end when I tried FAZ at $42.79. I should have known better and just stayed out of this market on this particular day, but I didn't. I was stopped out a little while later at $41.01, giving me a 4.2% loss, although my stop was set at $41.49 and I got an absolutely horrible fill. I mean, 40 cents off the stop?? C'mon Scottrade. You can do better than that, right? That puts me down a little over 4% for the year. I got to get something going here soon - haven't been timing these trades as well as I need to do.

My outlook remains the same - I see nothing that interests me on the long side and until there is leadership and some nice charts popping up, I don't see a need to chase this move, especially with us facing overbought conditions once again, a situation that has led to a signficant pullback every time it occured for the last year or so. I know overbought markets can stay overbought and we do have a little more room on the oscillators to the upside, but that usually applies to strong markets, and anyone that says this is a strong market is crazy in my opinion. We may keep rallying into the weekend as the institutions try and paint the tape a bit for the month-end numbers, but at some point soon, I am still expecting a pullback. I will look to play it from the short side and hopefully I can time it better than I did today. As always, if the pullback is calm, support holds, and I see nice charts showing up, then I have no problem changing my outlook and turning bullish. But chasing here just seems unsound to me, so I won't do it. I can't do it. If you do, best of luck. If I see anything interesting in my scans, I'll try to post it tonight. Got to go shovel some snow and ice now - good luck tomorrow.

Tuesday, January 27, 2009

I Am Sensing A Few Crazy Days Ahead

I was going to do a video tonight but after seeing the big "news" come out today in regards to the newest taxpayer-sponsored bailout via this "bad bank" idea, I am sensing that the next few days will be crazy and unpredictable and perhaps not worth trading anyway. We have the Fed meeting tomorrow, and those days are typically very volatile - who knows what stunts they will pull and how the market will react. So although I still see an overwhelming number of bear flag setups in my scans as well as an increasing number of head and shoulder patterns setting up in individual stocks, I don't know if I will be able to profit from them. Everything looks bearish but if the government intervenes (which is looking likely) it will be hard to play this.

News-driven markets are crazy, volatile, and illogical, and trying to play them always seem much more like gambling to me than trading. Charts and patterns don't matter in these types of markets. Everything I see points to a breakdown in stocks soon, but I know that doesn't have to happen, so I am going to be extra careful trying to time potential shorts. I hope I am wrong and that I can just play the patterns for what they are worth, but with this "bad bank" idea hanging over the market probably until early next week, I kind of doubt that will happen.

Given that I continue to see virtually no leadership in this market and no stocks that look good on the long side, I won't be chasing any move higher here if we get one. I still don't think we'll get anything meaningful and I would much rather stay in cash until an optimal shorting point comes, so that's what I will be doing. I guess my basic message is to be careful, because as the title states, the next few days might be crazy. Don't trust anything and be ready to get whipsawed.

I wanted to link as well to what I thought was a really good article written by Alan Farley about this current choppy, miserable market we have. I hope his take turns out to be incorrect, but it makes too much sense to not hold some unfortunate truths from my perspective. Just wanted to share. Good luck Wednesday.

State of the Market - 1/27/09

Another short commentary today because my outlook remains exactly the same as it has the past two or three days. Today the market opened higher, fell quickly, but bounced back up and basically chopped its way sideways to close with modest gains on lower volume (once again). This makes three consecutive days of modest gains on progressively lower volume. That is not bullish.

Technically, the S&P continues to be held under the 850 level and with the 50 day moving average still looming overhead, I continue to look at this market with a bearish bias. The Nasdaq is still stuck beneath its 50 day moving average and is starting to look like a possible head and shoulders pattern - it's not perfect, but it is there and developing.

I said last night that if we had one or two more choppy up days (like we saw today) it might get the indices up to overbought levels and present a really nice shorting opportunity in terms of risk/reward. We aren't that overbought yet, but we are getting there in the short-term. The oscillators are still fairly neutral overall but again could be overbought with one or two more days of higher prices. I am kind of hoping for that to occur, as I would really like to get short on a move closer to 870 on the S&P.

After a quick look at my scans, I continue to see the same thing - lots of bearish patterns setting up and a drastic lack of leadership on the long side that would lead to a nice rally. There have been very few stocks I have had to remove from my short list the past few days. JPM, GS, and PNC all still look about as bearish as you can get from my perspective. Let's add WFC to that list, which is forming a nice looking bear flag. XLF is looking like a nice bear flag as well. That's just the financial sector. As much as I would like to bullish, I just can't ignore these facts.

As I said earlier, nothing has changed. The individual charts I watch are very bearish and the patterns on the indices look bearish as well. I am still looking to get short soon but realize we may have a bit more room to move to the upside. If we do, that will likely just make the risk/reward ratio even better from the short side. If you are going long this market, be very careful. I still think cash is better than trying to catch these tiny upswings until the short setups start breaking down. As always, I could be completely wrong and the market could take off here. Everything I see right now, however, tells me that very likely won't happen. I will try to do a video tonight to look at these short setups again that I am watching. Until then, take care.

Monday, January 26, 2009

State of the Market - 1/26/09

This commentary is going to be a little shorter today because I really don't have a lot to say. We had another very choppy, directionless session where we started higher in the morning, ran into some overhead resistance, sold all the way off, but bounced into the close preventing a breakdown. Everything I said last night in the video still is true - we are in a small consolidation here and until we break out of it one way or the other, it is going to be hard to make a lot of money. Volume continues to soften as this consolidation progresses. Watch the 50 day moving average around 870 as upside resistance and 800 as downside support on the S&P. A break of one of those levels and we probably have ourselves a tradeable move to trade, perhaps a meaningful one.

I made a small trade today in TC at $4.73 this morning but was stopped out later at $4.61 for a 2.8% loss. It looked good at the time and I was basing it more on the individual chart rather than the overall market, although at that point, the market looked good too. No need to overstay your welcome though right now in my opinion - if positions don't work right away, get rid of them. I would have been better off just not even watching this market however.

I said last night that I was leaning bearish due to the individual stock setups I see and I still hold that belief after today. I mean, look at JPM, GS, and PNC. Can someone please explain to me how these setups are bullish? V-shaped dead-cat bounces with receding volume as they get closer to their short-term moving averages? That's about as bearish as you can get. I am still looking to get short these names when the time presents itself - it's just a matter of figuring out what time that will be.

Oscillators and indicators are still pretty neutral so I don't see an edge from that aspect yet. However, if we chop our way a little higher over the next few days (sort of like we did today), that might present the perfect short setup of being overbought and hitting overhead resistance at the same time. We'll have to see if it works out that way.

That's about it for now - I really don't know what else to talk about. I think the Fed meets this week so that may hold the market hostage for another few days along with more earnings. If you are looking for some plays, almost all of the short setups I posted last night still look pretty good at first glance after looking through them. As for the long setups, there still just aren't that many good-looking ones. All the reason I guess to keep my bias on the short side and remain ready to act soon. Good luck on Tuesday.

Sunday, January 25, 2009

Video - Weekend Market Summary - 1/25/09

Here's the video for the upcoming week - I am trying to remain as neutral as I can because we are in a short consolidation here and the number one rule of trading is to always respect Mr. Market. Based on my setups, I am still leaning short and if I had to guess, I still think we are setting up for a big move lower. I still see a lot of potential bear flags and very few long setups that get me excited. We need leadership and I just don't see any out there. That being said, I know the market can do whatever it wants to and if we somehow climb above the moving averages sitting overhead right now, then I would probably get rid of my bearish thesis. Short-term, things are pretty neutral and until we break out of this area, difficult trading conditions will likely remain in place. Hope the video helps - have a great week and good luck!

Friday, January 23, 2009

State of the Market - 1/23/09

Following up on yesterday's chop session, things looked quite bearish early on for the stock market today. Futures were significantly lower pre-market and stocks did gap down at the open. The markets did however bounce quickly off the gap, but looked to be forming bear flags when they bounced as they rose right up into some overhead resistance from yesterday. Around 10:30, it looked like the market was starting to break down from these bear flags and did move lower for about fifteen minutes, but then popped back up out of nowhere and broke to new highs around 11:00. Stocks immediately pulled back, but held their breakout points and moved slowly higher throughout the rest of the afternoon, although in a very choppy and slow manner. They hit a temporary high around 2:00 and started pulling back again. Stocks pulled all the way back to the breakout point once again and bounced slightly into the close. All in all, stocks once again basically went nowhere. Volume looks to be lower today.

Technically, we have basically gone nowhere this week. Oscillators and indicators continue to be neutral. It looks like we are forming a very short consolidation here with 800-840 being the range for the S&P and 1435-1510 on the Nasdaq. A break of those levels could signal a tradeable move either way, but there is still upside resistance with the moving averages, so I continue to lean to the bearish side and am expecting a breakdown soon. I know we don't have to get it, but it still looks to be setting up that way. Perhaps this chop, although frustrating, is beneficial because it will allow a bigger, longer move to the downside if that indeed is the direction we are headed.

As I said last night, I went into today with a short bias but I never like to play an opening gap immediately - I prefer to wait ten to fifteen minutes to see what the market wants to do. That's what I did today. After about fifteen minutes, I saw a lot of stocks that looked to be forming bear flags intraday, so I did enter SOHU short at $38.12. I put a stop a little bit above yesterday's lows around $38.70 figuring if it got above that overhead resistance, it wasn't worth holding as a short. It did, and I was stopped out at $38.77, giving me a 1.7% loss. It continues to be frustrating getting these small losses, but give me small losses over big ones anytime. It is all part of the game.

A little later, after looking at these bear flags continue to form intraday, I felt I had to take a shot with FAZ and I entered at $68.20 on the pullback. My stop loss was around $66.80 - I didn't want to stick around if it broke to new lows, which I knew was a possibility even with the bearish flags I saw forming. I also shorted GS at $70.24 based on its intraday pattern and put my stop above the high for the day around $71.60. These ended up both being mistakes, as the market reversed back upward and stopped me out of both (FAZ at $66.76 for a 2.3% loss and GS at $71.61 for a 2.1% loss). After that, I figured three losses were enough, admitted defeat to this psycho market, and just shut it down for the day. It's frustrating but after seeing how they closed, I know I made the right move getting out quickly.

I really continue to have very little feel for where we go day to day and hour to hour in this market. I would be impressed if anyone does. Those bear flags that formed in the first hour looked almost technically perfect - wedging pattern on lighter volume right up to overhead resistance. I should have known they wouldn't work - when things look that perfect, this market has to screw it up. Since I don't have a good feel, I should have probably stayed out, but I couldn't when I saw those patterns and probably would do the same thing again. There were quite a few bearish looking setups last night so I had to go with what I saw.

Eventually, I hope the market will become a little less spastic and allow some tradeable moves that last for more than an hour or so. I don't know when that will be however - perhaps not until after earnings season, and if that's the case, it might pay to just sit things out for a while. It's just too tough right now. The intraday swings are not only making holding positions hard, but they are also causing a lot of individual charts to look patternless, which is probably a reason I had so few setups until last night.

I'll be back some time this weekend with some thoughts and some charts. Most of the bearish setups I showed last night are still valid, so I am still leaning bearish here. Take care and enjoy the weekend.

Thursday, January 22, 2009

Video - Some Short Setups - 1/22/09

After going through my scans, I found a surprising number of short setups that looked like possibilities, so because of that, I put a short video tonight. I don't go over the indices like normal because as I said earlier, right now I have no clue. There is too much news going on that could affect things and it's not just the news but the reaction to the news that is especially hard to predict. I still think we head lower and that's why I am willing to take a few short-term trades on some of these setups but I also realize we could get some spikes upward before heading lower. It is a tough time to trade so be careful.

State of the Market - 1/22/09

Are we having fun yet? The stock market continued with its volatile trading today, as after a big move down Tuesday followed by a big move up today, stocks decided to kind of make both moves in the same session. The day started with futures down big pre-market and after moving sideways for about an hour after a gap down, stocks continued their move lower all the way into the lunch hour. A temporary bottom was put in at that time and stocks moved higher for about an hour, consolidated for another 45 minutes, and then started a move upward around 1:45 that took them to new intraday highs for the session. This move certainly looked bullish at the time, but because nothing can be easy in this market, stocks gave back most of this move starting at 2:20 and sold off into the final hour. After moving sideways for about a half hour, stocks popped briefly and looked like it would bounce into the close, but that didn't happen and stocks finished right in the middle of their intraday range. Volume was heavier on the Nasdaq due to MSFT and AAPL, but looks to be lower on the S&P. All in all, quite the roller coaster ride today, and I don't think we ended up going anywhere.

Technically, it looks like the downtrend line I showed last night is indeed going to act as heavy resistance, because the S&P, Nasdaq, and XLF all were rejected at that line today. If they somehow get above the downtrend line over the next week or so, they would then still likely have to deal with their moving averages and that will probably be difficult, so the bull case still doesn't make much sense for me here. On the downside, the 800 area on the S&P is important and if that breaks, then I would guess we would have a ticket to the 740 area, which coincides with the November 2008 lows. The 1440 level on the Nasdaq is important short-term and if that is broken, the 1390 level will be the next level of support to watch. The Nasdaq remains in better technical shape compared to the S&P, but it could certainly fall apart quickly and also get down to test its November lows. Sentiment indicators and oscillators continue to be pretty much neutral so they aren't giving me a whole lot of clues as to where we head from here.

I had a meeting at work today that kept me away from the computer until around 3:00, so I didn't make any trades today - after seeing the volatility, I didn't see any good edges out there. Frankly, I was confused. There is so much going on right now in terms of news and earnings that it is just really hard to get a grip on what this market is going to do from hour to hour, not to mention from day to day. News-based environments are particularly difficult and tricky - that's why I said recently that if you have to trade right now, I would just stick to day-trades. Just too tough right now to hold onto positions for more than a few hours right now.

I am being honest when I say I really don't have a good feel for where we go tomorrow. The trend is definitely down and we are not really oversold, so if you have to do anything, I would look for short-term shorts. Better yet, I would probably just sit these random, unpredictable moves out for the time being - that's what I am going to do. When better setups start showing up in individual charts, I'll jump back in, but I have had a lack of those this week (which I've talked about) and maybe that's a sign that this just isn't a good time to make a lot of trades. Tomorrow is Friday and it will be interesting to see what happens before the weekend in this type of environment - good luck.

Wednesday, January 21, 2009

Buying Today Was Much Weaker Than Yesterday's Selling

After going through my scans, I still didn't find a ton of interesting setups on either side of the market. I had some short setups yesterday but now some of those are questionable. This lack of setups, and the fact that we are still neutral indicator-wise, might cause me to not do a whole lot tomorrow. Once I get more setups showing up, I'll try to get another video done. Right now, there doesn't seem to be much reason to do so. I may just play some ETFs if the market rallies again up to the areas I mentioned earlier.

Based on my scans, the selling strength in terms of breakdowns yesterday was much higher (1580 breakdowns of more than 4%) than the buying strength was today (only 953 breakouts of more than 4%). That has been pretty typical of the one or two day pops we have had during this bear market, so that confirms my feelings a bit that today was nothing more than a typical short-covering pop.

Here are the indices with the areas I am watching pointed out. We may rally more tomorrow but I am watching for a reversal at some point soon. Just hope I can catch it. Take care and good luck Thursday.

S&P 500
Nasdaq
XLF
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

State of the Market - 1/21/09

After getting taken to the woodshed yesterday, the market responded with a higher open today and although it was a rough ride overall, ended the day with nice gains. Stocks opened higher, immediately pulled back, but then tried to move higher once again. When they couldn't break out, they started pulling back around 10:00, and by 11:00, had lost all of their opening gains. The bottom for the day was put in at that point, as stocks rose steadily higher throughout the lunch hour and into the afternoon. They broke to new intraday highs a little before 3:00, and continued higher into the close, allowing the market to finish with large gains. I don't know yet what the volume totals are - at first glance, it looks like they will be close to yesterday or lower.

Technically, I thought we would have to be a bit lower to get a bear market spike like this but you never know when these things can pop up. We are still pretty neutral in terms of the oscillators and indicators, although the VIX reversed hard today. Although we did close slightly above the downtrend lines of the past two weeks, I really don't expect today to amount to anything meaningful and as such I am still looking at possible resistance levels to watch to possibly get short. 850 and 873 are the levels I will watch on the S&P, and I would watch around 1525 on the Nasdaq. I have to think these levels will be hard to bust through for this market. I am also watching XLF and I could see a reversal happening around $10-$10.50. If it manages to get through that area, I would watch around $11.30. If we get above all of these levels, then maybe my outlook would change.

I took one short this morning (ADM at $26) as I liked the bear flag it was setting up right below its 50 day moving average - it looked like it had the potential to fall much further. I originally had my stop around $26.60, but when the market moved back off its lows, I did tighten the stop on it as I didn't feel like getting caught and I knew I could get back in later if I was stopped out. My stop ended up getting hit at $26.26 for a 1.2% loss. I did have more shorts on my watchlist and kept an eye on them for possible entries but wanted to wait to see if this first short worked - seemed like the smart play for me. I knew the market could put in a sharp bounce if it wanted to just because, so I was completely aware of that. Turns out it was a good move. I made no other moves today.

As it is, today's bounce doesn't really change my outlook - actually I think it could be beneficial to me and my plan. The trend is definitely down from everything I see, so a bounce here may allow me to get positioned short after missing the latest move. Nothing has changed economically, and we were nowhere near technical levels yesterday that demonstrate a possible bottom could be forming here. These spikes upward are normal in bear markets as I said yesterday but they are meaningless in the grand scheme of things unless they are accompanied by nice-looking stocks breaking out and strong leadership emerging in the market. We have neither of those things so my game plan remains the same - short this market when it gets up close to its short-term moving averages.

I am interested to see my scans tonight - we had a lot of 4%+ breakdowns last night so if we don't have an equal number of 4%+ breakouts today, then I would feel even more secure in my plan. I will try to be back later if I get any revelations after looking at the data. Good luck Thursday.

Tuesday, January 20, 2009

We Aren't Oversold in The Short or Intermediate Term - Not Good News

Just a few charts to check out just to show that we are definitely NOT oversold in the short and intermediate term. We are in a very news-driven market right now and a sharp bounce can materialize out of anything so be alert, but based on these charts, the rest of this week could be quite ugly. Be careful.

S&P 500
Nasdaq
VIXT2106
T2108
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

State of the Market - 1/20/09

A historical inauguration day in Washington, D.C. was met with a giant "ho, hum" today on Wall Street, as the financials continued to drag down stocks in a steady manner throughout the day. Futures were lower pre-market today and the market did start with a gap down that led to more selling in the first hour of trading. They tried to stabilize a bit for the rest of the morning and moved sideways into lunch, but around 12:30, right as President Obama wrapped up his speech, the market broke to new lows and led to more selling through the rest of the afternoon, although it was slower and not as severe as earlier in the session. Things did start to fall apart though in the final hour, as the selling picked up and stocks fell into the close with only a small attempted bounce and closed with large losses across the board. Once again, volume patterns were bizarre or at least appear to be - volume on the S&P does look higher as of now but on the Nasdaq, volume looks like it will come in lower. This may change after I get the final data.

Technically, the markets obviously look awful right now and the fact that oversold conditions last week have not led to a bounce is definitely not good news. We could get one of those famous bear-market short-covering spikes at any time where the market is up 5-7% in a day and CNBC is calling another bottom, but those are hard to time and not a given. Plus, the more intermediate-term oscillators are not yet oversold, and the VIX overtook its 50 day moving average today and could run from here, so we could be in store for more selling - a bounce is definitely not a given. Don't try to catch falling knives here.

Based on what 2009 has brought us so far, it sure looks like we could be looking at another situation like October where we just kept selling off with no end in sight. A key development today was the breakdown of the financials, which broke to new lows (all-time?) today even with the oversold conditions present before today. Next levels of support on the S&P and Nasdaq are 740 and 1295 respectively, which mark the 2008 lows. If we get that low, I would guess we break those lows and move even lower.

I once again did nothing today as I said I would - I just can't get short with the market so oversold in the short-term although I probably should have. I know as soon as I do, we probably get one of those short-killing spikes. I still plan to short any bounce or anytime the market gets near its 9 day moving averages, but I certainly missed out on this latest move. I don't know why - I think a big part of it is that my mind has not been as focused on trading with the new baby at home. I hope that doesn't sound like an excuse - I don't mean it to be. I am just being honest - there is an adjustment and the time I can put toward trading is not as much as it used to be. I went into this year really telling myself not to force things because of this - I just thought being extra careful until we adapted to having two little ones instead of one was a smart move. I am flat for the year so it's not like I am losing money - just missing out on some of these moves lower from the short side. Still can't believe I was in FAZ at $36 and let myself get stopped out of it at $38. Yikes.

Things are obviously very ugly out there right now, and with sentiment not yet near extremes it could get uglier in the short-term. It is probably a little too late in my opinion to put on swing trades in this market where you aim to hold them for a week or two, but I think you can short selectively as long as you remember to keep your time frames very short. Be aware that a short-covering rush could happen at any time. Overall, the trend is obviously down, the quick bounce I expected was very, very weak, and now it looks like the selling is going to get pretty nasty. Be careful out there -this historically awful market looks like it is about to pick up some steam. Good luck Wednesday.

Monday, January 19, 2009

Weekend Market Summary - 1/19/09 - Waiting Things Out For A Few Days

Well, after getting my share of great football this weekend, I was able to put another video together. Here it is for this past weekend. Main points for the video include:
  • My scans didn't show me many setups on either side of the market and short-term, we aren't really overbought or oversold, so I don't think there is a real edge here in terms of taking trades.
  • I am still looking for a shorting opportunity around 870-880 on the S&P and if we bounce a few more days, I will likely focus there. I don't want to force trades thought the next few days.
  • Financials are very oversold and could bounce at anytime, but I think a bounce will just be another shorting opportunity.
  • Beware of news events right now - earnings plus a new administration plus bank problems equals lots of volatility.
  • Video goes over the indices and what my game plan is for the week.
Weekend Market Summary – 1/19/09

Direct download link here. Good luck this week - be careful the next few days. Go Steelers!


Friday, January 16, 2009

State of the Market - 1/16/09

After putting in a bullish reversal yesterday, it looked early on that stocks would build on that move as futures were up pre-market due to another tax-payer sponsored bailout for BAC. Stocks did gap up but really didn't move any higher and slid much lower in a choppy fashion throughout the morning hours, reaching lows around lunchtime. The Nasdaq moved 50 points off its highs and the S&P moved 30 points off its highs, so this looked very bearish at the time. However, stocks put in a bottom there and moved higher throughout the rest of the session in a choppy fashion, closing slightly below their morning highs. Volume looks to be close to yesterday on the S&P but lower on the Nasdaq.

Technically, the Nasdaq bounced right up to its 50 day moving average today so it is getting close to the levels I would look to get short at again. I think it could move as high as the 1550 level though so the timing of this will continue to be tricky. The S&P still has a ways to go to get up to that 870-880 area that I would look to get short at again. Financials were particularly ugly today on a relative basis so that is something to watch - XLF is still quite oversold so I am going to have to wait for a bounce to get short here - I don't want to chase to the downside.

In my earlier post, I said that I doubted I would trade today and that held true - I did nothing. I am glad I did, because today is the type of day that will make you go crazy. With the opening gap, it certainly looked like the market was going to build on the reversal from yesterday. So what does it do? Just fall 30 and 50 points on the S&P and Nasdaq respectively in about two hours. That is about as bearish a scenario that you can find after being so oversold going into yesterday. I am guessing a lot of people went short at that point, so what happenened? The market rallies right back up and takes back most of what it lost. Too much whipsawing going on right now for my tastes - I will wait for the inauguration to pass before getting heavily invested on either side of this market.

As I said earlier, I will try to get a video done this weekend and since it is a long weekend, I should be able to do so. Right now, my outlook hasn't changed - I think we can get another day or two of higher prices, but I expect this quick bounce to fail as we approach resistance. The variable is the whole inauguration thing and how the market reacts - will it be a "sell the news" event? I think it could be so I am really only looking to the short side of the market right now. After doing my scans, I'll be able to see if any bear flags are setting up on individual stocks that can be shorted next week. If I find some, I'll send them along in the video. Take care and have a great weekend!

A Few Morning Thoughts

I'm going on limited sleep once again as the little guy was up a lot last night, so bear with me. Here are some thoughts though after going through my scans yesterday.
  • Today is going to suck for me after getting stopped out of my long ETFs prematurely yesterday. I should have kept my eye on the market more after getting stopped out, but once those stops were hit, I figured we were in for more selling and a reversal at a lower level and turned my quotes off to focus on other things. When I checked back in, we were already flat for the day and the big rally I had anticipated already occured. Never take your eye off the ball I guess. I did and I missed my chance to get back in even though my timing was off a bit to start.
  • I am still looking to short this bounce in another day or so. To be honest, it wasn't that impressive when compared to other one day reversals we had in 2008. The S&P closed a total of 26 points off its lows for the day. Other one-day reversals from late 2008 include 9/18 (73 points off the lows), 10/10 (60 points off the lows), and 10/16 (81 points off the lows). Of course, volatility was much higher then as well, but overall, I don't think this will amount to anything meaningful. I compare today to September 5. Back then, we moved higher the next day as well, hit the 50 day moving average, and started a volatile move back down.
  • The financials have led the recent swoon down, and all the taxpayer-sponsored "good" news from today aside, I will focus on shorting this sector via SKF or FAZ when the XLF gets up around $11.15. I think XLF could bounce all the way up to around $12 (its 50 day moving average), but I doubt it will get that high. I mean, seriously, what makes anyone think this particular taxpayer-sponsored bailout will be the one that solves all the problems? Everytime we have had one of these bailout reversals in 2008, it was quickly met with selling in a few days. I don't know what makes this time any different.
  • I haven't gone through my short scans yet and will wait till the weekend to do so. I'll compile a list of individual stocks then that I will focus on, although the way individual stocks acted recently, maybe I am better off just going with the inverse ETFs. I would guess oil, retail, and the aforementioned financials will be the areas to focus on. Tech via Nasdaq is looking stronger on a relative basis compared to the S&P.
  • The big unknown here is how the market will react to the inauguration of Obama. I have no clue, but I am sensing a possibility of a sell-the-news reaction, even though we really haven't had a big rally into the event. If we rally today and Tuesday, maybe Wednesday is when we start selling off again. Just my thoughts as of now.
I don't expect to make any trades today but if I do or have any other revelations, I'll post my thoughts on Twitter. With the long weekend, I'll put a video together at some point as well, although it might not be until Monday with all the sports this weekend (Go Steelers!). Good luck today!

Thursday, January 15, 2009

State of the Market - 1/15/09

Sorry for the late post - picked up a new dryer today and it took longer than I thought to get it in the house and hooked up. It's good to go now though.

Bad news from the financial sector and Apple Computers caused more rough times today for Wall Street, at least early on. Stocks started flat but sold off hard quickly, pausing only briefly around 9:45 for a quick bounce that was also sold off. They hit lows around 10:30 and bounced from there, but that bounce ended up looking like a bear flag, and stocks fell back to their lows starting around 11:30. They broke through them during the lunch hour, but reversed higher and rose very nicely into the afternoon, rising all the way up to challenge and in some cases break through yesterday afternoon's highs. They pulled back to start the final hour, but then bounced once again to finish positive at the close although a bit off their lows. Volume was a good bit higher.

Technically, the bounce has likely caused many bullish reversals on individual charts as they did on the indices. If we finished stronger than we did, I think I would be a little more bullish but as of now, this is basically just fitting in with what I have been looking for the past week or so. At some point, the oversold conditions had to manifest themselves and today looks like it was that day. Now the question is whether this reversal will lead to further upside. It may, but I am still looking at August 2008 as the comparison (check out the graph I showed yesterday) and the first reversal there lasted a total of two days before it hit resistance around the 50 day moving average and then fell further. I am looking at the 880 area as strong resistance for the S&P 500 - the 9, 20, and 50 day moving averages have all converged in this area - and the 1550 area as strong resistance for the Nasdaq - the 9 and 20 day moving averages are a bit above their 50 day so it may get over that a bit. That's where we reversed back in August so I would expect it could happen again. If we get that far, I would likely look to get short.

It was quite the frustrating day for me today, as I bought two ultra ETFs in the morning anticipating a bounce but got stopped out before the bounce happened. I entered SSO at $21.96 and DIG at $25.07 this morning around 10:40 or so. Things seemed to be slowing down in terms of selling, the VIX was wedging its way higher intraday, and I just had a feeling that I needed to try to catch a swing there. The play worked well for about an hour, as the market moved off its lows. I moved my stops up a little to where I would be out if the market moved to new lows for the day. Well, it did around 12:40, and I was stopped out of SSO at $21.66 (a 1.5% loss) and DIG at $24.73 (a 1.4% loss). The losses were very small so it's not a big deal, but it is frustrating to see them move higher after I got stopped out. As I said last night, timing a bounce is difficult and I was just a little off in my timing and paid for it. My read itself turned out to be correct however.

Maybe things will change after going through my scans, but today's bounce doesn't change my longer-term thinking - I am still looking to get short at some point soon. I was expecting a day like today and hopefully you were listening and took some profits on your shorts today. Since I was stopped out of my ultra ETFs today I don't know if I will try to play anything else on the long side, especially ahead of the long weekend. That was my shot and I probably blew it, so I will likely just wait to get short again. It should be an interesting few days with earnings and the inauguration coming up to start next week. I am off work tomorrow so if I do anything I will post the moves on Twitter. I may have some more thoughts up as well before the open. Take care, and good luck Friday.

Wednesday, January 14, 2009

Still Looking for a Quick Oversold Bounce

After going through my scans, I still stand by my earlier thoughts that we are due for a relief bounce soon, perhaps a strong one. Not the type that is going to change the longer-term trend, but just a typical bear-market one caused by massive short-covering. After going through my scans, I saw quite a few stocks that have pulled back rather nicely to support levels (either former breakout levels or important moving averages). At the same time, I continue to see a lack of huge, powerful breakdowns on volume in the shorts I have been watching, outside of the banks and some retail. It's possible we continue to just drip lower here on lighter volume, but I am expecting something to happen soon.

Someone asked earlier if I had made some money this year after calling for a pullback last week, and unfortunately I really haven't. Shorts just haven't been acting the way I expected - maybe I have just picked the wrong ones. I wish I would have given my FAZ position more room to move, but again, I was expecting more volume on the breakdown in XLF which never came, and that really messed up my analysis. Oh well.

Here are some of the stocks I will be watching over the next few days as possible plays on a one or two day bounce back up to around the 50 day moving averages. With the AAPL news along with earnings from JP Morgan in the morning, it is certainly possible we could have another rough open tomorrow. Timing an oversold bounce is always tough, but I will be watching carefully tomorrow and looking to possibly enter a few longs with tight stops. Good luck.

Longs to Watch: OI, IN, MYRG, USG, DRYS, LINE, FGXI, ULBI, SEA, MWA.B, GROW, ARST, XTXI, GNK, COGO, APWR, DIG, KWK, EAC, RGLD

State of the Market - 1/14/09

After a slow day yesterday, the bears took back control of Wall Street today, as poor retail news caused stocks to sell-off throughout the day in a rather severe manner. The indices gapped down to start the day and continued to sell-off until around 11:00, when they started to move sideways a bit. From about 11 to 3, the market consolidated the morning selling by moving in a range that had a slight upward bias. As the final hour approached, the selling started again but stocks were able to hold their morning lows for the most part and bounced back up into the close to finish a bit off their lows, but still with large losses. I don't have the final volume totals but it looks lower on the Nasdaq and about even on the S&P 500, which is somewhat surprising for such a big down day.

Technically, today was a pretty big technical breakdown for the S&P below strong support around 850. Next support below that level is around 815. The Nasdaq has not broken down through support around 1476 yet but it is close to that level. Support around 1490 was broken today but not severely. We are still very oversold in the short-term and the past few days are getting us closer to oversold on an intermediate-term time period. I am still on the look out for a relief bounce soon, but I would watch the 880-890 levels on the S&P and the 1540-1550 level on the Nasdaq as a place to get short, which is right where the moving averages are converging as of now.

I was away from my computer for most of the morning so I made no trades today, but I don't know that I would have anyway due to the oversold conditions. I continued to think it is risky to initiate shorts here and if I was still short, I probably would have taken most of my gains by now. I could be wrong of course and we could continue to fall straight down here, but I don't really expect that to happen.

If you've been reading for the past month or so, you know I have compared this market setup to August of 2008 and I think that comparison still applies. Check the chart out below. What I am looking for soon (based on the short-term oversold conditions) is a sharp bounce that takes us back up toward the 50 day moving average. This is where I would look to get short again. I will also watch the 9 day moving average as a possible area of resistance. I think the intermediate trend is definitely down, especially after a day like today, but short-term a bear market bounce is a good possibility. It is not a guarantee - we could keep falling regardless of being oversold much like we did in October and November - but I think the odds are decent of a one or two day bounce soon.

S&P 500 from August 2008
Chart from Telechart 2007, Courtesy of Worden Brothers, Inc.

We'll see what tomorrow brings - perhaps this is the beginning of a move like we had in October and November that just won't stop when it starts moving to the downside. However, with the lighter overall volume I think it probably won't be that easy. Longer-term, the trend is definitely down and I think we can all agree that this bear-market rally is officially over, but shorter-term, I am going to wait for a quick bounce before getting some short positions on. I don't know if I'll try to play the bounce, but shorting near the 50 day moving averages sure looks like a good play to me. Good luck Thursday.

Tuesday, January 13, 2009

State of the Market - 1/13/09

A very choppy day today on Wall Street as stocks started higher, swooned starting around lunchtime, and then bounced into the close. Volume was mixed - slightly higher on the Nasdaq and slightly lower on the S&P 500. All in all, a very mixed day in which nothing much was accomplished from where I sit.

Technically, we pretty much are at the same spot we were yesterday - still oversold in the short-term but as long as we are below the 50 day moving averages, the intermediate-term outlook still looks bearish to me. I still expect those moving averages to act as heavy resistance if we bounce up that high.

I once again did nothing today as the 850 area on the S&P was never approached and I did not plan on taking any positions on the long side unless that area was tested. If we get that low over the next day or so, I may still look to go long for a quick bounce. If we bounce soon however (say tomorrow), I would be looking to get short again like I said yesterday. Either way, I will be away from my computer tomorrow for meetings, so I probably won't be making any trades tomorrow either.

All in all, I don't think I am missing a whole lot right now by sitting out this market. From where I sit, there just doesn't seem to be a lot of movement right now, and when that happens, forcing trades is just about the worst thing you can do. One of my resolutions for this new year was to not overtrade and I am trying my best to stick by it. Right now, I just don't see a big edge for either side of the market and until I do, or until things start moving again, I'll probably continue to just be as patient as I can. Earnings season is going to make things difficult as well so be careful. Good luck Wednesday.

Monday, January 12, 2009

A Few Charts Showing the Short-term Oversold Condition

Just a few quick charts to show the short-term oversold condition I was talking about earlier. I haven't done my scans yet, but based on volume, I may change my mind and look to play a quick bounce if we get down around 850 on the S&P. I certainly wouldn't be looking to short anything here and if I was short, I may be more inclined to cover some soon.

S&P 500
Nasdaq
XLF
All Charts from Telechart, Courtesy of Worden Brothers, Inc.

Probably won't be back later - good luck Tuesday.

State of the Market - 1/12/09

After selling off right to support to close last week out, the market broke down today below that support as the selling continued. Stocks opened slightly down, but continued to fall pretty steadily all the way into the lunch hour. They moved sideways from there for about two hours until around 2:00, where they broke the consolidation to the downside and fell further. They hit their lows in the final hour and bounced a bit into the close, but still finished with large losses. Volume appears to be lower overall for the fifth straight day.

Technically, some key support levels were breached today on both the S&P and Nasdaq, namely the 50 day moving averages. That type of breakdown is usually a sign of a change in trend, although I expected heavier volume on such a significant technical break. There could be strong support in the short-term around 850 on the S&P and between 1490 and 1500 on the Nasdaq, and a relief bounce could occur from those areas, so be careful. I would expect however that the 50 day moving average will act as resistance for any bounce that occurs much like it did in August. If we get back up near that area, I would look to short.

As today was my first day back to work after an extended Christmas break due to the baby, I really didn't do anything trading wise. To be honest, I just didn't feel it. I felt a little hesitant to short today due to the continued lower volume and the fact that we have been down a few days in a row now. This will probably be a mistake but for some reason I just thought passing here and waiting this out a bit was the best move. It's not like I am buying anything - I am just thinking we may bounce a bit soon, perhaps back up to the 50 day moving average, which would give me a much better risk/reward to go short here. We're now oversold in the short-term so that's why I see a bounce as a possibility. If it happens, I will be looking to load up on the short side.

I am a little frustrated because I see many of the shorts I have been watching carefully but passed on now breaking down in earnest (FSYS and WGOV come to mind) without me, but you have to be in the right mindset to trade successfully and I knew the past few days from the end of last week that my mind wasn't in it. I'm not sure why, but hopefully I'll get back into the swing of things soon and be ready to profit from what looks like a possible intermediate-term trend change in the making.

Not much else to say for me - things are breaking down but trading is still quite slow here so be careful. Earnings seasons starts tonight and perhaps that will cause volume to pick up a bit. I am 100% in cash as I do not like these low-volume moves and will not be chasing shorts to the downside right now - just can't do it . However, I also don't expect to try and play a quick bounce. Most likely, I will wait for the indices to get back up near the support they just broke and get short then. If you are already short, then I don't think I would worry too much - maybe take some profits if the S&P gets around 850, but there doesn't seem to be any reason to cover longer-term positions based on the breakdown today. Good luck Tuesday.

Saturday, January 10, 2009

Video - Weekend Market Summary - 1/10/09

Here's the video for this weekend. Main points for the video include:
  • I was still somewhat bullish when I wrote my post Friday due to us still holding support and volume coming in lower, but after going through my scans, I have changed my outlook. I don't know if we will break through support soon or not, but it certainly looks like things have changed or are about to change.
  • My overbought indicators have come down but not as much as I expected. We aren't oversold yet - I thought we may be on Friday.
  • Still see quite a few playable short setups and the longs I have been watching continue to dwindle. Seeing AIPC and CSKI act the way they did is not good.
  • Video shows why I am not encouraged by the longs I am seeing and some shorts that still look poised to breakdown soon.
Weekend Market Summary – 1/10/09

Direct download link here. Off to watch more football - hope my Steelers can pull it out tomorrow. A Ravens-Steelers AFC championship game would be absolutely epic. Good luck trading next week.

Friday, January 9, 2009

State of the Market - 1/9/09

Today was setting up to be a big day with the jobs number coming out from December, but it turned out to be the exact opposite, as stocks swooned early but then did nothing but go sideways in a low-volume environment. When the number came out this morning around 8:30, futures responded positively and based on the reversal yesterday, things looked promising for a rally. They spiked a bit at the open, but the indices immediately reversed and fell quite hard for the next twenty minutes, with the S&P falling all the way down to the 890 area that I have talked about this week. That area did hold, and stocks bounced quickly. They fell right back down to that area, though, held again, and bounced a bit up to the lows of yesterday, which acted as resistance and stocks basically moved sideways in a channel for the rest of the morning and into the afternoon. Stocks tried to break out around 2:40, but nothing was happening, and they drifted back down to test support again around 3:20. I am wrapping this up a little early today (around 3:40) so maybe something big will happen in the last twenty minutes (forgive me if it does) but I somehow doubt it. Volume appears to be lower today or at least feels low.

Technically, a lot of the overbought conditions we had to start the week have been worked off for the most part and we're actually getting oversold in the short-term. Now if we broke through support today on heavier volume I wouldn't worry about being oversold - I would have had no problem getting short some names. Since we didn't, and support held, I am a little hesitant to short here. I did see some individual breakdowns todays but due to the slow trading I didn't take any of them. I'll continue to watch that 890 level as key support and as long as it holds, I guess I lean to the long side more right now. To be honest, I don't know. This week was a little bizarre - I expected a more convincing move one way or the other with heavier volume as the new year started in earnest, but we didn't get that. We got a whole lot of nothing.

I was ready to buy some stocks near the open but luckily paused as I wanted to see how things held early on. My only position was LVS from yesterday, and that was stopped out at $7.16 for a 1.75% loss, although my stop was at $7.23 so I got another bad fill on my stop. After seeing the reversal hold right around support, I had a feeling today would be difficult and didn't do anything from then on. That turned out to be a good idea. I had some shorts on my watchlist (FSYS, NEU, WGOV, BRC, RMG, RL) but really was wanting a break of support before going short. I never got that. I still had an eye on a few longs but also passed without a strong bounce - VISN broke out nicely but didn't have the volume I was looking for.

Today was one of the more boring days I can remember for a while - very slow and nothing got accomplished. Hopefully trade will pick up next week and we can get some moves that allow things to be easier one way or the other. I'm off to get a sled for my son's first sledriding experience tomorrow since we're due for 3-6 inches here in Western PA. In between that and football this weekend, I'll try to get a video done. Take care and enjoy the weekend.

Thursday, January 8, 2009

State of the Market - 1/8/09

Another day of light-volume pullback for the stock market as traders likely were hesitant to take major positions in front of tomorrow's job number. The day started with selling that lasted for about an hour, but neither the Nasdaq or S&P got low enough to test the support levels I mentioned last night. Around 10:20, buyers came in and took the market to new highs for the day, with both indices going briefly positive. This bounce lasted until around 11:00, when stocks stair-stepped their way lower in a channel through lunchtime and into the final two hours of trading. Right around 2:00, they broke to the upside out of this channel. They quickly pulled back, spiked again and actually broke to new highs for the day before pulling back once again as the final hour started. That final pullback lasted until around 3:30, when stocks rallied into the close. Volume appears to be lower and it definitely felt lower.

Technically, the last two days managed to take away much of the overbought condition that was present at the beginning of the week - most of it, but not all. In fact, in the very short-term, we are close to being oversold after today, although I think it would have been much better to not get that late bounce. Given the low volume, the past few days look so far like consolidation and a healthy pullback, even though the losses yesterday were severe. Continue to watch those levels I mentioned yesterday (around 890 and 1550) and as long as they hold, then this could be a good buying opportunity. Of course, if the market doesn't like the job number tomorrow, then this could all change.

I went into the day looking to possibly get more short than I already was, but when I observed the trading during the first half hour or so, that plan changed. I didn't see many stocks on my short watchlist breaking down and trade was once again very, very slow in general. Because of that, I didn't feel like pushing it too much on the short side. I set my stop on FAZ somewhat underneath yesterday's high, figuring that if the financials reversed off their gap down, I wouldn't want to be short them for the short-term. My stop was set at $37.96, but was filled at $37.75 giving me a 4% gain on the position. Watching it go back up later was frustrating but I stuck by my plan and can't be too upset. At that point, as I watched the market reverse off its opening lows, I also covered my MR short at $16.78 for a 9.4% gain. These two trades allowed me to get back on the plus side for the year but only barely. Overall, although the market did pullback the way I expected the past two days, it wasn't the easiest pullback to short based on individual stocks. I probably just picked the wrong ones.

Later, I tried a few longs - SOL at $5.01 and LVS at $7.27 with tight stops. Both of these were based on their daily charts where they were bouncing off some support and also their intraday charts where they appeared to be breaking out. I was stopped out of SOL at $4.87 for a 3.25% loss when it reversed its intraday breakout. I should have known better trying to play stocks in such a slow, low-volume market., but I showed a lack of discpline there.

This continued to be somewhat of a weird market. Another nice-looking leader had a rough day today (CSKI) which is not good and another one (AIPC) looks even worse to me even with its reversal, but at the same time, I still don't see the vicious breakdowns I would expect of a market that is just starting a major move lower. I guess overall I am looking more on the long side right now, but I want to see how the market handles the employment report tomorrow.

On Tuesday, I said that as long as volume was lower and support held, then this pullback could probably be bought, and so far it seems to be setting up that way. I see more longs that interest me right now than shorts. We could still breakdown and if the indices break below their moving averages, then all bets are off, but as of now, I will selectively be looking to buy here with tight stops. I think the risk/reward for going long is better now than it was at the beginning of the week.

I don't think I'll be back tonight with a post so here are the main longs I will be watching tomorrow. If we breakdown below the moving averages, I may go back to just using the inverse ETFs because the individual stocks I am watching have been difficult to play on the short side. If you're really interested though, just check out the video from last night. Here are the longs: FGXI, OPTR, FORR, ARST, WPRT, VISN, LZR, GMKT, JASO, CSKI, MEA, ACAS, SOLF, SOL, LVS.

Good luck tomorrow - the slow action of the past two days should set us up for a big move I would guess. Leaning long but not married to that outlook. See you Friday.

Wednesday, January 7, 2009

Video - Wednesday Market Summary - 1/7/09

Here's the video for tonight. Main points for the video include:
  • Today was bad but it doesn't kill this market. I am looking at the 50 day moving averages as the last line the bulls have to defend. We are still a little overbought so more selling is possible. As long as support holds and volume is lower, I would probably look at buying a pullback. If volume is heavier tomorrow with more selling, then the tone of this market could indeed change.
  • Video shows some longs to watch for in a few days (not now) and some shorts that look poised to breakdown or did breakdown today.
Wednesday Market Summary – 1/7/09

Direct download link here. Lots of news these next two days - should be interesting. Good luck Thursday.

State of the Market - 1/7/09

The pullback due from historic overbought conditions present in the stock market over the past few days finally came to fruition, as stocks started lower at the open and trended lower throughout the day. Stocks fell for the first ten minutes, bounced for a little bit to form a bear flag, and then fell to new lows around 10:10. They moved sideways for the next hour or so and then started to come on, coming near the highs of the early bounce as lunchtime approached. From there, however, there was a steady amount of selling and when stocks broke to new lows around 1:40, the selling intensified into the final hour. They hit a low around 3:05 and bounced, pulled back down near the lows of the day, but put another bounce in during the last 10 minutes to close slightly off their lows but with large losses. Volume was not very heavy today for the amount of selling we saw and that should be welcome news to the bulls. Based on the volume, this could just be a normal pullback.

Technically, the 920 and 1600 levels on the S&P and Nasdaq could not hold but I have said this week that with the overbought conditions, I would look at the 50 day moving averages as more logical support. Right now, those levels are around 890 and 1550 respectively, and they also intersect with the uptrend line that has formed off the November lows. As long as those levels hold and volume continues to come in lower, then I would think this pullback can be bought. I have not yet gone through my scans so I don't know how leading stocks acted - I know AIPC put in a nasty reversal and looks awful but CSKI held up very well. After my scans, I'll have a better idea if today was the start of a nasty move lower or just a simple pullback that was long overdue and possibly could be a buying opportunity. The selling took away some of the overbought conditions but I think it could take another few days of rest to get a good risk/reward setup on the long side - just my opinion.

One interesting data point - the bulls/bears survey showed even more bulls this week (42% bulls vs. 34% bearish) and as I pointed out this morning, the last time this happened was mid-August, which was the top of that bear-market rally. I don't like seeing so much bullishness and complacency out there - not a good sign for continuation of this rally.

I came into the day aiming to take on more shorts and I did, although in hindsight not as many as I should have and I picked the wrong one while passing on others. I went back into SVR short near the open at $10.96 and added more later at $10.92. It looked to be breaking down below its 50 day moving average, but it soon reversed and I ended up being stopped out at $11.49 for a 5.06% loss. That was way bigger than I should taken but I fought this stock and didn't use a hard stop on it (originally it was set around $11.21 but I cancelled it). You can't ever lose your discipline as a trader and I did with this trade.

I also entered FAZ at $36.03 on a breakout and added later at $36.66 - this one worked out well, at least so far. I finally added to my MR short at $18.01 as it looked to be breaking down further. I had several others I was watching closely (FSYS, WIBC, SOHU, WGOV, QLGC) but due to the light volume on the selling I felt it was smart to wait for the close in case there was a quick bounce late. I almost started a position in FSYS but passed and for now only have the FAZ long and the MR short. Again, I will have a better idea of what to do tomorrow after my scans, but at first glance, I still see quite a few possible short setups if we get more selling.

Hopefully you weren't chasing longs the past few days and didn't get hurt with this pullback. Volume was lower so I don't yet know if this will bring more selling, but when you get a market stretched so much to the upside, a day like today is always a possibility. I will be back with at least a few thoughts after I go through my scans and if I have time will put a video together. For the rest of this week (since I am hanging out at home and not working this week, trying to help out my wife as I much as I can with the little guy) you can check me out on Twitter as I try to post my trades as I go on there. Good luck Thursday.

Still Overbought, Too Many Bulls For Me, Still Looking for Pullback

Quick post this morning. As I read various blogs and news sites, I am really amazed by the sudden bullishness that is out there right now. It seems like everyone is now buying and that this market isn't going to stop for another month or so - maybe several hundred points higher on the S&P. I guess I am just a stubborn, stubborn guy, because I am still bearish and am still looking to short. I may continue to be wrong - I have been so far with my timing, but I think a pullback that could lead to something more serious is very close to happening.

I have talked about the overbought indicators ad naseum the past few days and I won't go over those again - let's just say they are even more extreme than Monday. Here's two other data points for you though that I though were interesting. Look at the Investor's Intelligence data (new data is due to come out soon, but I am using last week's numbers.) Right now, we have an equal number of bears and bulls out there. The last time this happened was back in mid-August, when the bulls actually outnumbered the bears. Guess what happened in mid-August? (August 11 to be exact) Just saying. Again, too much sudden bullishness for me.

Reading IBD last night, I also noticed that this market is racking up some distribution and that the IBD index (which is made of the leading stocks of this market) was actually down 1.1%. IBD sounded cautious on the state of this current rally and when they sound cautious, I pay attention.

Again, maybe I will be completely wrong and this market will take off another 5-10% without stopping to take a breath. I've been wrong before and I will be wrong many times in the future - it doesn't bother me anymore. As for me, I am still not buying and I am watching SVR, WIBC, WTW, MW, and EDU as possible shorts today on breaks of their 50 day moving averages along with DUG and SKF among others. Good luck, especially if you're entering longs here.

Tuesday, January 6, 2009

State of the Market - 1/6/09

Quite the volatile day today on Wall Street, as stocks moved all over the place in three four distinct phases. The open was a solid gap for stocks and they did ramp higher for the first half hour of trading, getting even more overbought and extended than they were yesterday. Around 10:00, stocks put in a big reversal that took them all the way down to break the morning gap. Lows were hit around 11:00 and stocks moved slowly higher through lunchtime and really ramped up starting around 2:00. It looked like we were going to have another big move until around 3:00, where stocks reversed once again and fell sharply for about a half hour. They stabilized for the last half hour and closed with modest gains, but definitely off their highs. Volume appears to be heavier, particularly on the Nasdaq.

Technically, the overbought indicators are all even more extended with the gains and at some point I still suspect these will cause a pretty nasty reversal. 920 is still a key number on the S&P and as long as that number holds on a pullback, then bulls should feel OK. 1600 is the number to watch on the Nasdaq.

So far 2009 has not been all that kind to me as you might expect given my bearish stance on things. I tried a few more shorts today - short TGT ($37.19) and SVR ($11.17) and long DUG ($21.58) - but was stopped out of all of them by mid-afternoon. The TGT short was hit at $38.02, giving me a 2.42% loss. SVR was hit at $11.37, giving me a 2% loss. DUG was hit at $21.07, giving me a 2.66% loss. My QLGC short was also stopped out at $13.58, giving me a measly 0.84% gain. Right now, I still have my MR short and that is it. My account is down a little more than 2% for the year, which isn't a big deal but it is frustrating.

So, what am I going to do next? Well, based on what I see, I have to continue to hold my bearish outlook. I won't go through the overbought indicators again - let's just say they are even more extreme than they have ever been to this point. I completely understand the old adage "a overbought market can stay overbought" and I certainly respect that. However, that tends to hold much more true in a strong market, just like an oversold market can stay oversold much more easily in a strong downtrend - think 2008. I can't say this is a strong market - low volume on this overall move, few leaders, lots of beaten down stocks running. I am still expecting a reversal at some point - I just don't know when it will be. Hopefully I won't get myself into too much trouble as I try to figure out when it will happen.

If we pullback on lower volume, hold the 920 area on the S&P, and consolidate these recent gains in a healthy manner, then I will probably change my tune and my outlook. That's what I said last night as well. We certainly didn't do that today however. In my opinion, days like today are actually counterproductive for bulls. I am sure I would be happy if I was invested here on the long side, but I would also want the market to stairstep its way higher, pausing on lighter volume as it moves higher to digest its gains and allowing the move to be longer in duration. That's how healthy markets work. A move like this one, where the market doesn't rest at all, rises on relatively lower volume, and just gets more and more overbought likely will be reversed hard at some point, and when people start wanting to get out, there will be a mad rush to the door and things could get ugly. I just wish I knew when that mad rush was going to start.

If I have time and find anything interesting in my scans, I'll be back later, but I am probably going to sound like a broken record if you have read my recent posts. With the overbought conditions that are in place along with a beaten-down VIX, lots of sudden bullishness from what I see, and still more short setups coming up than longs, I still think it pays to not chase stocks and to get ready for a possible reversal that could (or at least based on history should) take place soon. I could of course be wrong - my timing certainly has been wrong so far this year - but I am just going by what I see. Good luck Wednesday.