Thursday, May 27, 2010

State of the Market - 5/27/10

Soooo...are you having fun yet?   If you are a daytrader, I am sure you are loving this market, but the mantra remains the same if you are a trader that prefers to hold positions for more than a few hours - we are in a virtually impossible market right now.   Yesterday we saw a nasty reversal off of what looked like follow-through to a very bullish reversal from Tuesday.   Today, we gapped up over 2% on news of China committing to more purchasing of debt from other countries.  Oh, yeah, volume looks pathetic. Seriously, if you are holding positions overnight right now AND making money in this market, please email me because I would love to know how you're doing and would love to share your strategies with my readers.

The market did break above some short-term resistance today and as I've said several times this week could be putting in a short-term bottom here.  However, the S&P isn't even above its 200 day moving average and there is lots of overhead resistance to deal with from here on so even if a bottom is in, it will likely be very difficult to play.   I personally just don't trust anything right now enough to hold any stock overnight and as such I remain in cash and will likely continue to make that my "position".   I really don't know what else there is to do admist this amazing volatility we are seeing.   As the summer trading season starts soon, let's all hope that the liquidity will decrease even more, which would make volatility even more stunning.

Tomorrow should be interesting because we have a long three-day weekend.   Will the traders who bought today really want to hold over that period of time knowing how much news could come out?   Will that push stocks right back down tomorrow another 1-2%?   These are great questions that I unfortunately don't know the answer to right now.    Tomorrow should be an interesting session.

Right now, really the only thing most swing traders should be doing is keeping a tab on stocks that have held up well on a relative basis for the past month or so (and I have showed several of those this week) and go from there.   If we have a massive bounce up near the 50 day,  I will start looking for shorts, but as of now, that doesn't appear to be prudent either.   Patience is a virtue and it's times like these when you need it trading.   Take care.


Anonymous said...

Hi Mac: SEED did not go higher despite good news. Are you seeing it going down to $5 before reversal? Thanks!

jull_mg said...

We are entering a phase of increasing volatility .. so the best way not to get whipsawed is to hold longer term (1-2 months) or very short term (1-2 day) .. i'm keeping my 30% short from april peak plus my 70% add up from the repeal of 50dma in mid may... crossing fingers for more downside momentum and secretly hoping for some "crash/panic sell event" where i would cover everything, and thus triple my account

Anonymous said...

3 words for you. BUY ON DIPS!

Mac said...

SEED - looks weak - it could pop at anytime but I think it has a long way to go before thinking about it as another "momentum" stock.

Jull - you are probably right with the volatility. I don't like holding long-term because "what if I am wrong?" I may take a huge loss if I have that timeframe and then the market goes against me.

Anonymous - Buy the dips sound great in theory, but this has not been an easy "BTD" few weeks. What "dips" did you buy? What about the dips on May 4 and 5? How about the intraday reversal on May 17? What about the slight reversal on May 19? I don't think I'm misspeaking when I say a lot of traders have been chopped to bits "buying the dip" for the past month. (unless you're talking about intraday dips only - then that's different)