Friday, January 28, 2011

State of the Stock Market - 1/28/10 - "Schizophrenic"

Wow, what an ugly day and what a crazy market we have right now.   Obviously the action we saw was just about as bad as you can get, with the Nasdaq closing down 2.5% and all indices ending at the lows for the session.   What makes the action even worse is that many individual stocks acted very well early on, pulling in traders that thought the bulls were back in control of things (yours truly included).   I see nasty reversals and ugly charts all over the place, and my main signal (along with my two secondary signals) went back to bearish today.  This is a schizophrenic market where neither the bulls nor bears seemed to want control.  If you are willing to believe it, however, the market certainly said today that lower prices are in store.

Right now, the action of the past two weeks is looking eerily similar to the last significant top we had back in April of 2010.   I am in no way calling for another crash like we saw then, but the setup looks very similar - a selloff followed by a quick bounce, then one really bad session once the indices got back near their highs.   If we see a gap up on Monday, it may be just a little too eerie for my taste.  

April 2010
Charts from Telechart, Courtesy of Worden Brothers, Inc.

I am in cash after a wild day of having all of my stops hit.  That CCME position I started yesterday (entered at $21.08) and was up at least 10% in??  No more - stopped at $21.05.   I entered REE yesterday at $13.07 - stopped today at $12.79.   I entered HSFT Wednesday at $29.98 - out today at $29.61.   I also entered BORN today at $14.22 on the early move higher.   That didn't last - out at $13.89.   I was quite happy yesterday and was almost at new highs for the year, but today fixed that pretty quickly.  Oh well - not really anything I could have done about it.  

Last week was a "screw the bulls" week on Wall Street.  This week was a "screw everyone" week.   If anyone bought the dip Monday, sold yesterday and went short early this morning, congratulations - you are perfect.   Unfortunately, I don't think many had that gameplan.   All you can do from here is look at what the market is doing, and certainly based on today's action, it looks like early this week was just a head fake to screw the bears.   Who knows - we may get another head fake/screw job early next week like we saw back in April 2010.  I have to go through my scans to decide if I want to enter any inverse ETFs yet or not, but since my signal is back to bearish, I will either do that or be in cash.   Hopefully next week will be a bit easier to trade.  Good luck and enjoy the weekend. 


JP said...

Perfect day for The Whipsaw Song!

Anonymous said...

Good daily & weekly commentaries .. Like 'em .. thanks,


Anonymous said...

short term bottom achieved and oversold on min charts
intraday bounce is needed next monday. a further minor fall on monday is alrite but we need bounce.

the bounce can be finished in upper shadow but its still ok.

remain the same view that 1206x ~ early 121xx is the midterm target by mid-feb.


zentrader said...

congrats on your steelers! at least that's one bright spot to look forward to next week.

Mac said...

Thanks Zen - I don't have a great feeling about the Super Bowl but we'll see. I thought they would lose to Baltimore actually.

Nidhi - thanks

JP - definitely a lot of whipsaws out there

mini-me - we'll see; Friday was a really rough session technically and one that will be difficult to just bounce right back from. It will take time IMO.