Monday, February 28, 2011

State of the Stock Market - 2/28/2011 - "Too Obvious???"

We saw a mostly positive session today on Wall Street, as the S&P and Dow closed higher and managed to close somewhere near their highs for the session.   These gains look like they will come on very low volume once again, although I don't have the final numbers.   The Nasdaq and Russell 2000 were much weaker, closing well off of their highs and in both cases looking very tired in the short-term.

Everything I see right now has me thinking that this market is going to roll over again and we are going to see some more selling soon.  My signals are all on "sell".  We have seen a very heavy volume selloff with a very light volume bounce into short-term resistance.   This totally looks like a dead-cat relief bounce that will fail.   Couple that with the amount of short setups I am seeing that look very similar and again, it seems like everything is pointing toward more selling soon.

My only concern (and perhaps I am just being paranoid) is that all of these setups seem SO textbook that I am wondering if it is too obvious for the market to rollover here.   Let me be clear - there is really very little reason to be bullish right now. I see almost no nice long candidates and those few that do try to move higher have often reversed on any strength.   The action is simply not very good out there.  

I made two trades today and both ended up being day-trades.   I entered OSTK at $15.13 on an earnings trade but it reversed hard in the afternoon and I ended up being stopped at $15.21.   I also entered ZAGG early at $9.13 but that didn't see any movement and I was stopped at $9.04.   I did exit my position in BW at $43.59 for a 12.2% gain.  It may run further but I thought it was smart to take the profits here.  

Right now I am mainly in cash with only one small long position.   I think cash remains smart here.   Again, call it a hunch or call it me paranoid, but I would not be surprised to see some major fakeouts this week.   Everything does look bearish and that is typically when this 2-year old bull market has screwed with traders, so I am going to be extra careful on the short side.   Good luck Tuesday.


DrVanNostrand said...

Mac-That is one of the toughest dilemas in trading, keeping it simple but not to simple; there are lots of head and shoulder patterns out there, lots of headline risk and a wedging rally all these point to a mkt headed lower. But, then is this a trap does every chart monkey out there see this? I'm in cash the primary trend is still up and many leaders are still holding above or hovering the 50dma and a lot of leaders have descending trendlines which they may break out of if the shorts get run over like they have every time this happened the last 2 years!

Anonymous said...

Totally agree, am in the same position, 90+% cash. Didn't even put on some TNA for first of the month gap up.

Jeremy said...

Agree with you. I found it very tough to trade these days. I didn't see good long set up either, and those that I tried to enter had a rough ride going up and I ended up being stopped out due to the whipsaw.
I only hold FXEN from Friday, glad I sold half pre-market early in the day

Mac said...

Maybe I am missing something, but the long setups indeed just aren't out there right now. The market is never easy I guess.