Wednesday, August 31, 2011

Stock Market Video - Mid-Week Update - "Back to Defense" - 8/31/11

Hi, traders.   Here's the mid-week video to take you through the next two days.   I think Sunday's video set you up pretty well for this week, as we rallied Monday and Tuesday (perhaps due to some month-end window dressing) but the market looked a little tired today so I think caution is warranted here.   The Nasdaq is running into some major overhead resistance and some "leaders" looked extra weak today.   I share these observations in the video and also share some short setups worth watching at this juncture.

I hope you find the video helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.  If you like the videos, please take a moment to leave a review on Investimonials  

To see the videos in HD, please click "720p" and "Full Screen" on the video bar - HD will be available after processing.


Sunday, August 28, 2011

Stock Market Video - Stocks Holding Up Well in This Tough Market - 8/28/11

Hi, traders - here's the video to get ready for the upcoming week. This week was positive but it was also very choppy intraday and it remains a market that is difficult to swing trade. Since we are entering the end of the month, I am open to the possibility of the market rallying here a bit further (window dressing) and as such, I talk about some key levels to watch as tells for the market as a whole. I also go through the stocks holding up better (relatively speaking) and that could be the next leaders IF the market decides it wants to go higher.


I hope you find the video helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.  If you like the videos, please take a moment to leave a review on Investimonials  

To see the videos in HD, please click "720p" and "Full Screen" on the video bar - HD will be available after processing.


Wednesday, August 24, 2011

Stock Market Video - Mid-Week Update - "Still Not Much Of An Edge" - 8/24/11

Hi, traders - here's the mid-week review.  I said going into this week that I thought it would be a tough one to do much with and so far it has been, even though the indices have been up.   Monday's action was very bearish intraday, but Tuesday we had a major up session.   Today was literally all over the place.   I still stand by my longer-term outlook that the best the bulls can expect is some choppy trade between 2550 and 2300 on the Nasdaq and that either cash or very selective shorting is the best option right now.  I go over these points in the video along with some setups.

I discussed a bear flag scan I run with TC2000 either on Twitter or a past post and a few people asked for the pcf for that scan.   Here it is - I also put volume and price filters on the easy scan to reduce the number of stocks that come up.   It basically looks for stocks moving up three straight days (or up today and at least one of the past three) on declining volume for the past three sessions.   When bear markets have their typically sharp, quick bounces, this can find some potential short setups for you.

Bear Flag Scan - (XAVGC9<XAVGC20) AND (C<XAVGC20) AND (((C>C1) and (C1>C2) and (C2>C3)) or ((C>C1) and (C1>C2 or C2>C3 or C3>C4))) and (V<V1) and (V1<V2) and (V2<V3)

I hope you find the video helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.  If you like the videos, please take a moment to leave a review on Investimonials  

To see the videos in HD, please click "720p" and "Full Screen" on the video bar - HD will be available after processing.



Sunday, August 21, 2011

A Look at the Week Ahead - 8/21/11

Hi traders - no video this weekend since I was gone most of the past three days on a family trip and also because we're kind of in "no man's land" here in terms of short-term trading.   Intraday action was very poor Friday and the market looks like it wants to at least test (or break) the recent lows.   However, we're getting oversold again and it is always impossible to predict what will happen when key levels are tested.  A breakdown would not surprise me, but a hard selloff Monday morning to suck in any last bears out there followed by a hard reversal back on Tuesday would also not surprise me.   It's that type of market.

Going into this past week, there were a lot of setups and I discussed many in the weekend video.  Although Monday and Tuesday were difficult, it did turn out to be a great week to short stocks.   I made nice money on RAX and could have made real nice money on PDS (which I shorted Monday but got stopped out of on Wednesday).   I also shorted CNX right before it announced news that popped it 10% after-hours which caused me to cover.   All of the other coal stocks were hit big this week but I got unlucky with that one.  The chart below shows the charts discussed last week as potential shorts and ALL show a gain over the past five days.

 
Since we just had a week where there ended up being a lot of nice setups, I don't have much hope for this week being as "easy".   Short-term, I really don't know.  Longer-term, the best case scenario for the bulls in my opinion is for the Nasdaq to chop around between 2300 and 2550 for another month or two and hopefully let some of the damage done from July 27 on rectify itself in the form of better charts.   That's the best case, so I am in no one expecting an important bottom to be put in anywhere in this area.   If we break the lows, all bets are off, including for a reversal back up to occur.   I do believe the best gameplan overall remains to short bounces as they come, be very careful with any long setups, and if you don't see a real edge out there, just stay in cash.

I am getting back to work this week (my real job, not trading) so I don't know how much trading or twittering I will be doing, but the end of the summer season is always thin and tricky, so watch yourself.   We've entered past weeks with better setups - this week there aren't many.   Good luck.

Wednesday, August 17, 2011

Mid-Week Video Update - Tough for Bulls AND Tough for Bears Right Now - 8/17/11

Hi, traders.   It's been a tough week to be a bull and a tough week to be a bear, as the intraday action has been choppy and difficult to do much with for more than a few hours or so.   I went into this week with a bearish outlook, but to be honest, the bears have been VERY unimpressive in my opinion the past two sessions.   Shorts have not worked well even though there are a lot of setups out there and the longer we go without breaking back down, the better odds there are for melt-up action to continue ala 2009 (heavier volume declines followed by weak volume moves higher).

The video includes some things to look for this week along with charts on both sides of the market.   If we don't see some bearish action tomorrow, I may have to reassess my outlook and go back strictly to cash.   Good luck Thursday and Friday.

I hope you find the video helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.  If you like the videos, please take a moment to leave a review on Investimonials  

To see the videos in HD, please click "720p" and "Full Screen" on the video bar - HD will be available after processing.

Lots of Heavier Volume Breakdowns from Bear Flags

Although this week has certainly NOT been an easy one to make money on the short side of the market, I will stick by my opinion that this is not the time to buy stocks and that we are heading lower (or if nothing else will chop around for a while without much price movement upward).  

I have a scan in TC2000 that looks for bear flags forming (up three days in a row on declining volume) and adjusted the scan this morning to include stocks down yesterday on heavier volume.   Filters were stocks had to be at least $8 and had to trade at least 500,000 shares.   Lots of big-time stocks on this list.   Hard for me to see how this is bullish at all.

Symbols from TC2000           DGX ETN CNX PFG ADI MCHP ADBE UPS IR STI MET CRM CCL PCAR PCP ALTR FLS KMX COL DVN AMAT JPM NE MWW MAS DHR XLNX LLTC AA APC SYMC PBCT JCI AXP BLK ROP AMP WDC HES TXN ATI PRU MHP BMC BCR HOG CSX SLM INTU BLL CTL EFX LM RDC CVS KFT EBAY CVC R HOT FITB MMM AKAM RHT DOW WHR STJ TROW MHS MUR AMZN TIF XRX FCX DD ADSK CMI BTU SAI EMC NUE M VLO TIE OMC AVY EMR FDX DOV WAT DIS PBI BBT HIG XL AKS LH RHI KLAC IVZ CMA MCO DVA CME HSP CAT LLL COH MAR PCL WFC IFF NTAP CBG NSC PNC GS NKE SWN NFX X  


Be careful out there - it's option week and trading intraday has been very whippy.  Stay in cash or if you like to frustrate yourself like me, you can try to trade some short positions.   That's been quite tough.  Good luck.

Saturday, August 13, 2011

Stock Market Video - What to Expect from The Trading Week Ahead - 8/13/11

Hi, traders - here's the video looking ahead at next week.   The past week was a historical one volatility-wise, but now the key is figuring out where the market heads from here.   All evidence (from what I can see) points to an outcome, and I discuss that in the video.   It is possible the market does something that surprises most (as it is quite talented at doing so) but the only reason to expect something like that is because it wouldn't be obvious.   All of this is discussed in the video as well as setups to watch for the next few days.


I hope you find the video helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.  If you like the videos, please take a moment to leave a review on Investimonials  

To see the videos in HD, please click "720p" and "Full Screen" on the video bar - HD will be available after processing.



Thursday, August 11, 2011

Gameplan for Friday's Market - "Call Me Unconvinced" - 8/11/11

Quick video tonight traders going over this current market.   We obviously had another big up day today but it came on lower volume and for various reasons discussed in the video, I am looking at any further bounces as potential shorting opportunities rather than buying opportunities.   I go over some setups in the video that I will be looking at next week, as I probably won't do much position-wise going into the weekend.



Tuesday, August 9, 2011

No Playbook, No Game Plan For A Market Like This One

At 12:35 today, the Nasdaq hit a high of 2445, some 88 points (3.7%) higher than the close on Monday.   Over the next two hours and ten minutes, the Nasdaq went down 112 points (4.5%).   At 2:45, the Nasdaq hit a low for the session at 2331.   Over the final hour and fifteen minutes of trading, it gained 151 points (6.5%) and closed just a bit below Monday's highs.   This was on the Nasdaq, not the Dow. 


I have only been trading for six or so years so my experience may be limited, but I cannot honestly remember a day that was as volatile and unpredictable as the one we just saw.   I can remember days where the market went down a ton (don't have to think too far back actually for that one...) and I can remember days where the market went up a ton (lots of those big bounce days in the bear market of 2008).   I cannot remember a day with as many violent swings back and forth as what we experienced today.   We saw moves that over the past two to three years would have taken weeks being completed in minutes.   Absolutely crazy. 

I'll be honest - I haven't a clue as to how to play this market right now, and that is why I am still in cash.   The scans I normally use to find long candidates are not even applicable right now.   Scanning for oversold stocks is pointless because we reached such extreme levels these past few days that finding meaningful differences between all of these beaten down stocks is almost impossible - everything is "oversold".   Charts are as ugly as I have ever seen them and there are no such things as "patterns" right now.   I have noted the stocks that have help up "better" this past week in my TC2000 software but finding a reasonable trigger point for these is also almost impossible. 

We just experienced a historic and (based on many breadth indicators) unprecedented selloff and because of that, it is going to take quite a while for the market to get back to a relatively normal state.   It is fun to think about catching bottoms perfectly and I'll admit that I thought about that a lot going into Monday's session.  I was hoping for a big panicky washout from which to enter some ETFs for a short trade.   The setup I was looking for never materialized.   Instead, we got today.  I don't know that anyone was looking for what we got today.

Around 2:45, I honestly though the market was going to crash.   To see a market as historically oversold as this one give EVERYTHING back from its early bounce (and more) so suddenly was mindblowing (at least to me).   Then to see it move right back up so quickly was just as mindblowing.  As I watched a flag form intraday on the indices from 3:15 to around 3:40, I did consider entering an ultra ETF or two like TNA, but I still didn't feel I had an edge so I passed.   I also knew that there was no way I would feel comfortable holding anything overnight in this environment.   That may have been the wrong decision, but I am OK with it - the good thing about the market is that there will ALWAYS be opportunities in the future. 

We'll have to see what tomorrow brings - I really don't have a gut feeling one way or the other right now.   I wouldn't be surprised if the market squeezes its way higher tomorrow for another 3-5% gain, but I would also not be surprised to see a major reversal that puts us down another 2-3% as caught longs look for any opportunity to get out of losing positions.   The days after Fed days tend to be confusing trend-wise so we have that to deal with as well.  I still don't think there is an edge here - not for the bears and not for the bulls either. 

Longer-term, I will be looking to short any move we may see up toward the 9 day EMA for the indices, although a squeeze may push us a little higher than that.   A move into the necklines of the recently confirmed head and shoulder patterns would likely be a gift for us traders, as I highly doubt the damage done over the past two weeks can be fixed with a major v-shaped rally.  

As the title states, there is really no game plan for a market like this other than sitting it out.   I guess that's a game plan in and of itself actually.  Based on today's craziness, anyone but scalpers would have better luck at Vegas than they would on Wall Street right now.   Conditions will improve trading-wise in time, but for now, not much to do but watch.   At least it's interesting I guess.  

Monday, August 8, 2011

Comparisons to Stock Market Crash of October 1987 - Black Monday - Some Scary Coincidences

I'll let the charts doing the talking.  I really, really, really hope these are just coincidences.  Seriously.

Dow, October 1987
Nasdaq Today
Charts from Telechart, Courtesy of Worden Brothers, Inc.

*** I added a quick video for comparison-sake.   My game plan has changed from trying to catch a reversal to just sitting back and watching history, because I think with potential circuit-breakers and such coming into play, trying to swing a bounce (when it occurs) is going to be virtually impossible.   Remember how wacky trading was on the Flash Crash day (couldn't enter orders, messed up bid and asks, etc)?   That's what we may seen soon and that will make it just too tough to do anything other than nothing.   Crazy times we're in - no doubt about that.   


Saturday, August 6, 2011

Stock Market Video - Trying to Make Sense of An Unbelievable Week - August 6, 2011

Hi, traders.   For some reason, I decided to do a video this week to try and make some sense of what was one of the craziest weeks I can remember since I started trading six or so years ago.  Monday is likely going to be crazy too thanks to S&P waiting until Friday night to release their downgrade news.   In the video I go over the following topics....

  • Some stats that show exactly how extreme this week was and where we are currently at compared to other extreme selloffs from the past three years.  
  • What to look for intraday to help spot a potential meaningful reversal and how to manage it if you decide to play one at this risky time (hint - USE STOPS).
  • Stocks that are holding up relatively well given the circumstances of the past week and those three or four that are my favorites.  
  • A look back at 2008 to see what we may be headed for over the next month or so.
  • A very short-term game plan for Monday and a longer-term game plan for the end of this week potentially into next week.   I'll give you a hint - they are quite, quite different.
Hopefully it helps - my mind is spinning like everyone else out there and I hope I was at least a little coherent in what I was talking about.   

I did not yet do a spreadsheet for earnings plays this week but will try to get one together tomorrow and if I do, I'll share the link via Twitter.

I hope you find the video helpful and informative.   As always, feel free to email me with questions or comments - I enjoy hearing from my readers.  If you like the videos, please take a moment to leave a review on Investimonials  

To see the videos in HD, please click "720p" and "Full Screen" on the video bar - HD will be available after processing.


Thursday, August 4, 2011

Some Interesting Numbers to Ponder

As I continue to watch the market flashback to 2008 here (totally in cash by the way), I like many others are looking for some clue as to when we bounce back.   One of the timing tools I use is a ten day breadth ratio that measures the number of 4% breakouts over the past ten sessions versus the number of 4% breakdowns over the same period.   This is a tool developed by Pradeep Bonde over at Stockbee and I have used it for a while now.

Anything under one is considered bearish, and this week (as you might expect) we've seen a steady deterioration in this breadth number since going below one on July 27.   After today's massive selling, that ratio is going to be around 0.17.   This is a historically low number - the second lowest I can find other than October 9, 2008, when it was 0.169.   That basically means the selling we've seen over the past ten days is the worst in over two years.

Since the bear market began in 2008, I can only find four instances where this ratio slipped below 0.30, and three of those only lasted for one day.   The one time it did dip below 0.30 and stayed there was in October 2008, the worst decline of that awful bear market.   We were very oversold on October 6 when the breadth ratio went below 0.30, but we continued to fall from there, putting in two sessions with over 5% losses over the next three days.   A bounce did come, but it only lasted for two days before the market kept selling off in a heavy manner.



Charts from Telechart, Courtesy of Worden Brothers, Inc.

A few days ago I wrote that "doing nothing is sometimes the best thing to be doing".   I do hope you listened.   I actually entered two earnings trades last night but got out immediately this morning and escaped pretty much unharmed.   Trying to catch a falling knife is risky business because, well, you can kill yourself.   Right now, doing the same thing in this market can kill your account.  

Yes, we are at historical levels and we could very well reverse hard tomorrow, especially if we gap down.   However, the market is telling us something on a bigger scale - things are not good out there.   This is not the time to be a hero - sit back, protect yourself, and don't get caught in a selloff that could (based on history) get worse in a few days.   Any bounce we get will likely be a great shorting opportunity, because you typically don't see selling at this grand of a scale simply during a little correction.   It's bear market city until further notice.  
   

Tuesday, August 2, 2011

Doing Nothing is Sometimes the Best Thing to Be Doing

Thank goodness our honorable and wise representatives in Washington, D.C. finally passed legislation to raise the debt ceiling (just in time, I might add) - I would have really hated to see what the end of the world would have looked like.   It seems to me that the previous few weeks, every person I heard talk on TV was speaking about how awful things would be if the legislation wasn't agreed upon - that the markets would just fall apart.   Again, thank goodness they got something done, right???

Back on July 27th, the market tanked over 2.5% and all three of my timing signals went negative.   We had 36 4% breakouts that day compared to 620 4% breakdowns.   It didn't take a rocket scientist to figure out that the market was in trouble.


To be perfectly honest, however, I expected a few shenanigans and for the market to get whipped around for a few days until this debt crap got resolved.   I wasn't finding any short setups that interested me and I still saw a few longs that were hanging in there.  I really did not expect the market to fall off of a cliff.   I was wrong.
Russell 2000
 S&P 500
Charts from TC2000, Courtesy of Worden Brothers, Inc.

The charts above say it all.   If you have been buying these dips since July 27th, then you are likely not in a good mood right now.   It's possible we get a little relief bounce soon, but with economic numbers relating to jobs coming out both tomorrow and Friday, we may just keep falling straight down.   Both the S&P and Russell are breaking through necklines on massive head and shoulder topping patterns.   To be fair, we've seen head and shoulder setups several times since the bottom in 2009, but this one is much bigger and the action is much worse than we saw during those setups.

How bad is the action right now?   Today was even worse by my measurements than July 27.   Today we had 52 4% breakouts (most in gold and silver or earnings related) versus 681 4% breakdowns.   That's a buy/sell ratio of -629.   July 27th's reading was -584.   We've had two of the worst three buy/sell days (along with February 22) of the past year in the past five sessions (technically, it's less than a year - we had a -1048 day on August 11, 2010, but I am just rounding off a bit).   That is certainly not what you want to see.

We are definitely oversold and could get a bounce soon, but now is NOT the time to be a hero.   Now is the time to sit back and basically do nothing.   Shorting an oversold market is typically not easy, but with negative headlines potentially around every corner, catching falling knives hoping for a bounce is even harder.   I thought that earnings plays might be OK to play this week, but so many of those are being sold into before the release that the charts in most cases have tons of overhead resistance to overcome on any gap they may get.
McClellan Oscillator
Charts from TC2000, Courtesy of Worden Brothers, Inc.

Hedge funds, mutual funds, and big institutional investors have 99% of the advantages over "little" traders in this business, but one advantage we "little" traders do have is that we can easily get to cash, sit back, and do nothing if the market tells us to do so.   Hopefully you are either in that position or getting there fast.   The rest of this week is going to be tough to do anything with, so relax and let the market figure out what it wants to do.   There are virtually no charts anymore worth even considering on the long side, but shorting is not much of an option either.   If we bounce, it will possibly set up some nice short setups, so there will be a time to trade soon - I just don't think that time is right now.   IMO, now is the time to do nothing.