Wednesday, July 27, 2011

Mid-Week Update - Indices Holding Up, But Action is Iffy Underneath

We've had a relatively calm week so far based on just the closing number of the indices, but under the surface there is a lot more going on in this market.   We've pulled back a bit which really is not a big deal in my opinion - we were up most of last week and have held the short-term moving averages nicely.   As long as we don't dip much below where we are at currently, then I still think you lean bullish here.  Now if we break through those short-term moving averages along with the 50 day, I would change my mind and look to short a bit, something I haven't even tried for a while now.  

S&P and Nasdaq
Charts from TC2000, Courtesy of Worden Brothers, Inc.

Just because the charts of the indices look OK doesn't mean all is well, however.   This week (and most of last week) have been very, very difficult to trade unless you have an intraday time frame.   Swing trading (at least for me) has been virtually impossible.  I have had many nice setups come up in my scans the past week or so, but the problem I am having is that as soon as a setup triggers, more often than not it just reverses right back, stopping me out.  This leads to several problems, ranging from the "death by a thousand cuts" effect it can have on your account (I am about 7% off of my highs for the year over the past week and a half) to frustration levels that can affect your outlook if you are not careful.

Whippy Action from Yesterday via WPRT

Now I do run my stops much tighter than others I guess under the premise that I am only right if proven right when trading, and usually when I'm right I am proven right very quickly.  I want a stock to work right away, and when it doesn't, I then take that as a sign that I was incorrect in my analysis and move on.   Maybe my method is just not compatible with this market, but I do take it as a warning sign.   I've seen so many whipsaws intraday where stocks pop, then immediately give it back (likely taking out stops in the process) and then simply rise back up to close where they "should" have in the first place.   That is not really the sign of a healthy market in my opinion.   Maybe it's just me and I'm picking the wrong stocks...

I guess my advice right now is to be careful with what you're doing.   I'm stepping back a bit here, playing a few names relating to earnings but that's really it.   I still see some setups out there that I like (if you want ideas, email me) but I don't really trust them right now.   I think I am going to wait until I see stocks move and act the way I want them to before continuing to take setups immediately when they trigger.  I'm not saying this market is topping or anything but it's not acting as well as I would like so I have to be a little more cautious.

Hopefully this market can get going soon and perhaps break to new highs which would make life easier for all of us, but it is still a very news-heavy environment so just be careful out there.   Good luck Wednesday.


Anonymous said...

Great post Mac. I'm seeing the same thing with many setup reversing then reversing again. As others are reporting, there is a divergence with breath and New Hi's compared to recent hi's. Again, no reason to "run for the hills" but to be alert. Best Regards! Steve Cleme

Anonymous said...

hi mac

no one notices the obvious top divs on dow daily chart?

its not yet oversold as at today (dow 12302) a bit further drop may trigger bounce but what after the bounce?

i think dow 12045 is coming soon and this will be triggered by an event. maybe fail to raise the debt ceiling?

sorry for my bearish view