Thursday, May 13, 2010

State of the Market - 5/13/10

This is all I have for today as I have some family commitments to attend to - the overall market looks very bearish on the daily charts of pretty much every index or ETF, but what would make me hesitate is that EVERYONE sees this.   Everyone I read right now is talking about the exact same thing - how the markets have spiked back up on consecutively lower volume sessions right into the heart of what should be resistance.   Naturally, this has most people expecting a breakdown soon.

I do think the market is headed lower, but it just seems so obvious for it to happen right now with this setup.   Maybe it will - maybe that's how the market is going to trick the majority this time.   Maybe too many people like me think a breakdown is too obvious and therefore won't play it and then it will happen.  

I remain totally in cash and pretty much disengaged from things overall.   If I were to get short, I think I would rather have a false break above 1180 and 2450 on the S&P and Nasdaq respectively from which to get short.   It would send early shorts running and just put enough doubt into traders and computers about whether the market will really pull back or instead go on another liquidity-driven low volume rally.   I think overall that "breakout fakeout" would be a safer setup.   We'll see if we get it. 

It remains difficult to swing trade right now so I'll probably continue to stay out of things.   No need to do much when there aren't a lot of great opportunities in front of you.   I'll continue to keep an eye on gold for a pullback (which perhaps started today) and for the right time to perhaps get short, but that's it.   Good luck out there if you're trading. 


Elingford said...

What is your system for identifying and placing trades?

You always seem to out think your self. Look back at your post for the past year or so. You have been doubting the trend every single time for the past year until the trend is near its end.

If you had a proven system you would just take the signals come what may.

Stop trying to out think the markets and just trade according the rules of a solid system wether CANSLIM, Episodic pivots, Earnings Breakouts etc!

Mac said...

2009 messed up a lot of my "system" and because of that I have been hesitant for a while. If you follow the CANSLIM strategy or the IBD way of market timing, you would know that they (IBD) were constantly whipsawed in 2009. They would put the market in rally mode, it would go nowhere then fall back down, and then they would put it in correction. As soon as it went into correction, the market moved back up. It happened several times. this is not meant to disparage them - it is just to prove that this market has changed and even historically "proven" systems have not worked the same for a while now. That's what makes things so tough for me personally - if historically proven things don't work, what strategies do work?

Elingford said...

I beg to differ with regards to 2009. If ever there was a year when there were many whipsaws it was 2008 but in 2008 you made money!!!

2009 was relatively smooth sailing compared to 2008 with many quality stocks setting up in bases and breaking out in July/August 2009 after a follow through when Chinese stocks were leading the market. Then again in November/December 2009 after a follow through again Chinese stocks lead. Then again in February/March 2010 when Semis/Entertainment stocks like CREE, LSCC, CRUS, NFLX based and broke out in March.

I have read every single one of your blog post for the past year or so and you have doubted all the follow through signals. AS opposed to buying into quality stocks breaking out of bases. Admit it! You have been guilty of this.

Mac said...

I've been guilty of a lot of mistakes the past year or so trading wise - believe me - and I think I've owned up to them many times on this blog.

I've been long plenty of stocks this past year but haven't made money off the majority of them.