Friday, February 5, 2010

State of the Market - 2/6/10

Oh, what a fun day today on Wall Street...not. In one of the most volatile days we've seen in a long time (at least from what I can remember) stocks put in several swings of more than 1% and were all over the place. The tone was set in the pre-market, where futures were a good deal lower until the jobs number came out at 8:30. They moved up off of that news and opened slightly higher. They quickly fell from there, bounced right up to new highs around 10:20, and then fell further after that quick spike. Lows were reached a little before 2:00, and from there stocks started a slow and steady climb upward. Things really got wild when the final hour started, as the Nasdaq moved almost 30 points higher in about 15 minutes before calming down and surprisingly going basically nowhere for the last forty minutes of trading. The market didn't end far from where it started when it was all said and done. Volume as of now does not look to be heavier than yesterday's level but I will have to wait for the final totals.

Technically, I really don't have a clue. Perhaps today we saw some sort of selling climax but volume was not even heavier than yesterday, so I find that somewhat hard to believe. The Nasdaq and S&P (along with pretty much every sector) put in very strong bullish tails today but could not climb above Monday's lows as well (actually the Nasdaq closed one point above). We may have seen a selling climax in commodities however based on the volume seen in USO, which was the heaviest I've seen in a long time. Climax or not, the problem that I see is that even if today was a climax, charts are so messed up right now that there is nothing out there to buy. Maybe I'll find something good this weekend but I do see a ton of stocks that are all over the place in just the last week, and those are typically not ones I want to trade.

As you may guess, I had a tough day - not in terms of losing money but in terms of being whipsawed a lot and showing no progress for good positions. Around lunchtime, my main account was up about 2% for the day and by the close that had all disappeared. Funny thing is that I had a thought to just cover everything midday but after thinking about it, I felt another sell off into the close was more likely. I was just a bit wrong on that one, huh?

Going into the day, I was short REV, NYX, and COH, and also had positions in FAZ and SRS. Around lunchtime, I was quite happy with the way things were looking. I was stopped out of my SRS position early on at $8.24 (1% gain) as I moved my stop up but wasn't too upset about it. I also went short BCS this morning at $17.29, which also moved lower nicely. However, that quick spike at 3:00 took me out of most of my positions with very little gains. FAZ was sold at $21.49 for a 9% gain. REV was covered at $15.43 (high of the day) for a 2.7% loss. COH was covered at $34.17 for a 2% gain. For some reason, I kept BCS and NYX but both are very close to my stop loss levels and I wouldn't be surprised to see them gap above those Monday.

Right now, this market is so volatile that after today, I think it is just too difficult to swing trade much. With my full-time job, it is impossible to watch quotes all day long, and yet that seems like what you really have to do to be successful right now. Day traders do have to be loving it. I meanwhile have to learn to adjust - setting stops and trying to let positions develop is not the best strategy right now. I was taking profits really quick at the beginning of the year (rarely holding more than a day) and maybe that's what I have to stick to. I would really like to be able to get catch some 15-20% moves in stocks, but I don't know if they are out there unless you time things absolutely perfectly. I may have to be happy with grinding out 5-10% gains or less and just focus on keeping my losses tight.

It's the weekend so I think I am done for today. After today's wild action, I honestly haven't a clue as to where we open up Monday - I wouldn't be surprised by a 100 point gain or a 100 point loss. When I don't have a feel for things, I find it best to sit things out, and until we settle down a bit, that's what I plan to do. Again, today was simply too volatile for my taste - with my job, I am simply not nimble enough to play this market right now and I need the break after the whipsaws seen today. Take care and enjoy the weekend.

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