Monday, December 31, 2012

Shutting It Down for 2012

So the fiscal cliff is still out there, and the market remains completely at the whim of every single headline, rumor, or comment made by any of the idiots involved in this mess.  With one day of trading left in 2012, it's enough for me to take the day off and call it a year.   I tried to make some trades last week but really just spun my wheels, which has been a theme for the past few months.  Everytime my account made a little progress, I immediately gave it back.   Most of this was because I tried to let some trades turn into longer ones and did not immediately take profits of 1-2%.  My preferred method of trading is to let 5-10% gains develop while always cutting my losses, but at least for me, the market simply wasn't giving those types of trades out over the last few months.  I guess I should have adapted a little better and become more of a scalper.  

We'll see how 2013 develops - I am hoping it is a little more swing-trader friendly.  I will day-trade but much prefer a market where stocks don't breakout, immediately reverse after a day and give all of the breakout gains and more back, and then proceed higher after stopping people out.  I saw a ton of those types of charts this year, enough that I think I have become conditioned to simply sell into every breakout I see rather than holding them.  Historically, that is not the way to make big gains, but the market seems to be changing with algorithms and black boxes and Fed intervention and incompetent governments (well, that has been there for a while now) so as a trader, I have to adapt too. 

I didn't have a terrible 2012 stat-wise, finishing up about 27%.  I was hoping for much better however coming off of a 58% gain in 2011.   My win percentage was slightly better in 2012 that the previous year, but my average gain was over 2% lower than in 2011 (3.6% vs. 5.8%).  Maybe that's my trading.  Maybe it's the market.  It's probably a little of both but it's something I need to look at over the next few days as I look ahead to the new year and decide how I can improve my performance going into 2013.  I became much more of a day-trader this year and again, I have to look at whether that was my fault, the market's fault, or a combination of both.  Perhaps it was the right decision even though I didn't like doing it as much.   You can only take what the market gives you. 

Going forward, I honestly have no idea what happens with this fiscal cliff but I do know that trading a market that can crash or spike on every single tweet or news release coming out of D.C. is not a market that is trader-friendly, at least in my opinion. 

If you are under the opinion that a deal will be reached and you want to go long, you have two problems.  The first would be trusting all of the idiots in Washington to actually get something done.   That is always risky.  The second is the idea that everyone is expecting a spike if a deal is announced, so any deal that is reached could turn into a massive, "sell the news" event.   We are oversold here so that is good for the bulls but a super-strong bounce on news of a deal is not a given in my opinion.  The market might spike for a few hours, maybe even a day.  After that, who knows?

If you are under the opinion that a deal won't be reached and the market will sell off, you are simply taking the big risk that at any moment, some semblance of a deal will be announced and a massive spike (even if it is short-lived) will be sending you off the "cliff" as you are squeezed out of your short position.  Not fun to be on the wrong end of a short-squeeze. 

Some markets are simply not meant to be traded, and this one falls into that category.  Until this whole mess is finished, trading is going to be all over the place.   Too difficult if you ask me, and if you don't have some sort of small edge in this game, it's best to sit out.   I certainly do not see an edge here one way or the other. When things finally get settled one way or the other, I will be ready to jump back in, but not until then.  

My guess is that a temporary, "kick the can" type deal is agreed to at some point today and we are revisiting this mess in a few months.   If that happens, I probably won't be trading then as well.  My market score in negative at this point but if things improve and charts show up, I'll be ready as always.   Hopefully 2013 brings a strong, easier to trade market for all of us.   Best of luck to you and your families in the new year.   Take care.

Sunday, December 23, 2012

Christmas Week Setups

Some crazy stuff Thursday night on Wall Street with the huge drop in futures and a lot of fear on Twitter and Stock Twits, but really, it didn't turn out that bad.  I was a little worried as I was fully invested going into Friday and expected the worst, and while my account was down, I thought it could have been a lot worse.  As of now, I am holding a long position in AMZN because my stop has yet to be hit, but that's it.  Although the market did end up lower on Friday, the way it bounced back and finished off of its lows was relatively bullish.  Again, it could have been a lot worse.  

Going into the week, I am simply looking at things from a day-trading perspective because of the schedule (half-day Monday and off on Tuesday) and the likely very thin volume that will accompany trading.   There are some setups I see that look interesting, but it will be one of those situations for me that I'll be able to tell in the first half hour if I want to make some moves or find something else to do for the rest of the day.  If you see a lot of reversals and whipsaws early on, you can have a pretty good idea that it isn't worth doing much because the computers are running things.  

The charts I will be watching are below.   Have a very merry Christmas and enjoy the time with your friends and family.  Take care. 
Charts Courtesy of Worden Brothers, Inc.

Sunday, December 16, 2012

Stock Market Outlook - Choppy, Frustrating Market Continues - 12/16/12

I talked last week that the market was basically in a holding pattern waiting for a move one way or the other from the range it had built for very late November and the first two weeks of December.  That range was easiest seen on the Russell 2000, but was noticeable on the Nasdaq and S&P as well.  I had hoped a move out of this range (either way) would get a tradeable move going into the end of the year.  That was too much to hope for I guess.

We did get a great move out of that range on the Russell early Tuesday morning via a big gap up, a move that was matched on the S&P and Nasdaq, although not quite as strongly.  That gap held for most of the day.  Volume confirmed the move as well.   Then a little weakness came in late Tuesday on both the Nasdaq and S&P and our break out of the range was history. 

Russell 2000 - Breakout, Then Fake Out

If you're frustrated right now, you're not alone.  This simply isn't a very easy market at this particular point.  I made a little bit last week because I caught a decent trade in CLSN but over the past two weeks, my account has gone pretty much nowhere. Perhaps we do get the typical Santa Claus rally into the end of the year but so far all December has brought us has been choppy, confusing, lifeless trade.  Normally the meaningful technical breakout that was seen on the Russell last week that was immediately reversed would be extremely bearish, but the bears don't even have enough strength to push this market down hard.  I can't honestly call any of the selling seen on Wednesday, Thursday, or Friday heavy because only the Nasdaq is below its twenty day moving average right now and that's only because AAPL tanked on Friday.  

There were a few charts that stood out as I did my scans this week (shown below), but I honestly don't even have a gut feeling for where this market goes over the next few weeks into 2013.  We are a bit oversold and sitting on some moving average support for most indices, so perhaps looking on the long side is better at this point, but my guess is we just chop around the way we have for the past two weeks.  I absolutely hate saying that, but I think it's true. 

Charts from TC2000, Courtesy of Worden Brothers, Inc.

The fiscal cliff is still there and still hasn't been dealt with by Congress, and because nothing typically gets done in Washington until the last minute (if ever), we may be looking at a situation where rumors continue to drive trading until that last minute (which could be after Christmas).  Perhaps just trading lightly or not at all is the best idea right now.   Scalping or daytrading has really been the only way of making some dough the past few weeks, so I will continue to keep any trades I make very short-term in nature.

To be honest, after what happened in Connecticut last Friday, I don't know how much my mind will be focused on trading anyway for the next few days or weeks.  Having worked in the education field as well as being a parent of two young boys (one in first grade), this hit very close to home and I still can't get my mind around what Adam Lanza did to those kids and that community and what those parents are going through right now.  In general, I am not one to be emotional but thinking about this tragedy continues to bring me close to tears.  Life is difficult and throws curve balls at everyone, but I cannot fathom anything worse to have happen to a parent than this.  My thoughts like all Americans are with that school, that community, and our country as a whole. The only positive that could possibly come out of this horrible event is that perhaps something will get done in Washington to deal with this issue, both on the mental health side and the assault weapons side.   It just sucks that something like this would have to happen in order for change to finally occur. 

Best of luck this week and if you have kids, give them an extra hug this week.  Take care.

Sunday, December 9, 2012

Messy Market, So Keep It Simple

As I went through my scans tonight, I saw a ton of charts that I would best describe as being "messy".  Very few discernible patterns (bullish or bearish) out there.  This makes sense when you look at how the market is trading right now.   Last week was plain weird.   Seeing the Dow and S&P up with the Nasdaq down or vice versa is not normal market behavior and it seemed to happen all week.   One of the breadth tools I use tracking the number of 4% breakouts or breakdowns on heavier volume each day showed very little spread all week between breakouts and breakdowns.  Again, it's weird to see that for a whole week. 

We are currently in a very news-driven market, and those are very difficult to maneuver.  In markets like this, usually the best strategy is to either stay out or to keep things very simple.  That's what I plan on doing this week.  Since I see very few nice long setups (maybe MNST, CRM) and very few setups from last week acted well, I will simply focus on TNA this week.  It does move fast and it is setting up pretty clear levels from which to buy or sell. I don't have a problem going with a large position if it breaks one way or the other.   I would like to have some individual names but the market isn't presenting those opportunities in droves right now.  Again, keep it as simple as possible in difficult markets.   Good luck. 

Charts by TC2000, Courtesy of Worden Brothers, Inc.

Saturday, December 1, 2012

Stock Market Video - Outlook and Setups for Week of December 3, 2012

Hi traders - it's been a while since I put a video together but I had some decent setups and charts to look at this weekend so the time felt right.  In the video, I look at the overall market and what levels would have me concerned about the current uptrend.  My overall market score has been on the rise so I am hesitantly bullish here, hoping the bulls can hold this area in a strong manner.  I also share the setups I will be watching during the week ahead.   Hope you enjoy it.