Monday, May 3, 2010

State of the Market - 5/3/10

What a fun market, huh? A day after falling over 2% across the board on heavy volume, the market bounced right back today, regaining much of Friday's losses and putting the overall direction of the market completely up in the air. The day started higher, but stocks moved mainly sideways into the lunch hour. They had a sharp quick bounce at that point, and then moved mostly sideways with a slight upwards bias for the rest of the session, finishing with large gains.   Volume however does seem to be very light as of now. 

Technically, things are just a mess right now. In the video last night I said I was hesitant to short a break of 1180 and today is a reason why. I didn't think the bulls would give up that easily, and today shows that they haven't. That of course doesn't mean we can't continue to pullback from here. I'll be completely honest and say I haven't the faintest idea what tomorrow will bring. All I know is that things are extremely volatile right now and that is typical of a VERY news-driven market. It makes it very difficult to trade unless you're daytrading.

On Friday, I did enter FAZ at $12.11 - mentioned this in last night's video. I was stopped out of this today at $11.79 for a 2.6% loss. I didn't make any other trades last week and after today I feel a little better about my decision to stay in cash. If I was trading a lot, I know I would have been chopped to bits. This is a market where only day-traders should be trading - there is just too much chop and volatility to hold anything overnight. After having so little volatility for so long ( the entire rally up from February through mid-April), we have now had four out of the last five trading days showing moves of over 1%. If they were all moves in the same direction, it would be great. Unfortunately, they weren't - just back and forth with us really going nowhere.  I hope things settle a bit soon but as long as the news is dominating things, I don't know that it will.

Not much else to say - we just don't have a market that looks good to put swing trades on with durations of a few days to a few weeks. Too much uncertainty. One thing I will say - a bounce like today will put more shorts back into play and perhaps a break of 1180 can happen now without a whipsaw reversal - a possibility I mentioned last night (assuming we get that low again.)  If you're trading a lot this week, have fun - there are setups on both sides that I am watching but will likely wait until we get out of this consolidation before doing anything else.  I just don't trust the bears or the bulls very much right now.  Take care.

1 comment:

CW, Portland, OR said...

What is working? Since last March, buy the dips....obviously has to be in quality stocks, but it has continued to work.