Monday, May 17, 2010

State of the Market - 5/17/10

A volatile start to what should be a volatile week (options expiration on Friday) on Wall Street today, as stocks started the day flat, quickly fell past Friday's lows, but then rose from lunchtime on and finished with small gains.   This remains a market that can be traded intraday but a market that is very difficult to swing trade as it is quite unpredictable.   It is hard for me to say with any certainty what the rest of this week will look like, as I think we'll see some swings like we saw today as expiration Friday approaches.   My gut tells me that barring any news, we won't see a waterfall-type event soon with the market crashing again, but I also can't see the market getting much above its 50 day moving average over the next few weeks.   What does that mean?   Well, my guess would be continued volatility and continued chop. 

As boring as it is, I remain firmly in cash right now and I'm pretty sure I won't make any trades this entire week.   The current state of the market and the volatility present is one reason I am on the sideline right now (remember I do have a full-time job and am unable to watch the intraday action) but another reason is that my heart just isn't in it right now.   I'm being honest here - sometimes I need to just step away and "recharge" so to speak and I think I am in that mindset right now.   I think most traders feel that way from time to time.  Over the next few weeks, I will be able to have some time off from my regular job, so perhaps I'll get back into the market then when I can watch things more closely, but for now, for me, it is best to just sit out. 

Although I have been on the sidelines, I have stated several times over the past week or so that the only real plays out there if you have to trade is being short the indices and perhaps gold.   I still think that outlook holds true.   I would look to short any move back up toward the 50 day moving average and go from there - not here however.  The market may fall further but shorting at this point is quite risky.   Gold seems to be consolidating rather nicely - keep an eye on GLD to see if it can hold $119.   If it does, I would guess it has further to go to the upside.

That's about it for today.  To wrap things up,  here's an interesting read that was on Yahoo Finance about HFT this morning that I believe is very much worth checking out.   As I wrote in my big rant last weekend, I honestly don't think you'll hear a lot about this issue on most websites and networks because nobody wants to talk about it.   I'm not going to go into another rant here, but if the truth starts to come out and more and more people realize what is happening in our equity markets, even more faith will be lossed in the system, hurting all sorts of participants across the board.   People aren't usually going to sabotage themselves just to get the truth out there, and I think that's what we're seeing here in some way.    Take care and good luck out there if you're still trading this mess. 

Last final call for emails to be entered in the Stock Bandit's free pass for his advanced trading course.   I will announce a winner later tonight. 

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