Upside Reversal

The Markets gapped down hard yesterday.  But breadth on the downside was only marginal.  Just when the sell off seem to accelerate some sort of rumor from the Euro zone seem to trigger an upside reversal.  I must admit in the last 45 minutes it was an impressive reversal.  Again breadth was lacking in the upside reversal as well.  We will have to wait an see how this reversal to the upside plays out.  The markets will offer plenty of opportunities on the long side if this reversal is for real.

Lack of Selling..Lack of Buying

Lack of selling is a big problem in this market.  Most of the news from the Euro zone and elsewhere is priced into the market action.  I believe uncertainty is what is causing this market's range bound action.  Yesterday quite a few stocks appear to show some signs of life.  However, nothing to get excited about.  Remain in cash until the Market gives a telltale sign to go long or short.

Trudging Market

Market fought it's way up from Monday's bashing.  Market is clearly struggling and is range bound.  In this market, if you are not a nimble day trader I guarantee your portfolio will be wiped out pretty quickly.  If you are making poor trading decisions, overtrading, incurring unnecessary losses or have an urge to get back the money you lost, it is time to stop trading and take a break.  A better frame of mind certainly will help in avoiding mistakes in trading and preserving capital.

Market sell off No Surprise

Another day of moderate sell off in the Markets based on the breadth numbers I track.  This is hardly any surprise at all.  Friday was a positive day with breadth numbers skewed to the positive side due to annual Russell index reconstitution.  Overall distribution is taking place and the best place to be in is in cash.  I am expecting and hoping the sell off would accelerate in the coming days.  I nibbled in a few put options which worked out to be great in the last couple of days.  Other than that I am in cash mostly.  However, this isn't a time to be aggressively short either.  We are in a volatile zone.  Accept the fact that anything can happen in the marketplace and priority is to reduce your emotional toll by managing your risk effectively.

Sharp Sell Off

Stocks sold off hard today.  Steady decline from the get-go.  The single day breadth was also high to the downside compared to up days in the last couple of weeks.  The last four days of gains were wiped out in one day.  It is as if you climb up on stairs and come down on an elevator.  There was gradual improvement in breadth from last couple of weeks leading up to today but was not convincing enough to thwart a sell off.  We are in a volatile period. Staying in cash is the wise decision one could make to protect one's portfolio and psych.
If you are technical analysis fan you can read more here 

Steady improvement in Breadth

Another day of steady improvement in breadth on the positive side for the Markets.  Markets have quickly approached overbought levels and are waiting to hear from Fed policy meeting which concludes tomorrow.  Since the Markets are up 4 days in a row and are at overbought levels expect some consolidation after the Fed meeting.  As long as a sell off is contained we should see a tradeable rally develop.  A lot of Gold and Silver stocks and oil and gas sector stocks are showing good relative strength from the past few weeks.

Lack of Selling

The markets seemingly is digesting the gains from the past few days. There is a gradual improvement in the market breadth numbers that I track.  The improvement in breadth is not because there is aggressive buying but due to lack of selling.  So far this correction has turned out to be a 10-12% kind for the indexes.  There are quiet a few stocks trying to emerge out of consolidation patterns that could potentially be considered for long positions.  If your trade works do not hesitate to take profits quickly.  This market is still deceptive.  All bets are off if heavy selling takes hold.  Always use proper risk management and honor your stops.  Here are some chart patterns to discern.


AAPL, ALGN, CMG, CSTR, ISRG, LKQ, SXCI, TDG, TNGO

Cash is a position

The markets have shown remarkable resilience and rallied last week in the face all the bad news coming out of Eurozone.  Markets rallied due to rumors once again of Fed Stimulus and coordinated central bank intervention from major economies if the Greek elections become too close to call.  That being said, I would have like to see more number of stocks participate in the rally which was not the case during last week's rally.  What is important is not the news but how the markets react to the news.  Markets are still range bound and influenced by day to day news.  Only a breadth thrust will confirm whether this rally has any legs.  Once the markets get going there will be plenty of opportunities on the long side to make money.  At this point I am sticking with my belief that CASH IS A POSITION.

Think Trading Process by Stockbee

Here is an article from Stockbee who I consider my mentor even though I have never met him.

'Think process
Profit is an outcome of following a trading process. If you want to be swing trader you need well defined process. You want to be position trader you need well defined process. You want to be a day trader you need well defined process. Define your trading process, tweak it till you are satisfied and then run it again and again and again. Process is a sequence of steps you need to do to achieve your trading goal. Once you establish a process it is just a matter of repeating it daily or weekly'.

Here is the link to the article http://stockbee.blogspot.com/2012/02/think-trading-process.html

Patience will be rewarded

It's a tug of war between the bulls and bears. A see-saw battle out there. You can call it anything. Markets are volatile and range bound. If you are caught in the midst of this volatility and are not positioned correctly you will be torn to pieces both financially and psychologically. The huge gap-up yesterday was immediately nullified. Today just the opposite. Overall my breadth indicators are conforming to the downside. It would take time for this market to setup as many stocks are in the process of putting in a bottom. Patience will be rewarded.

Markets react to news from Spain

A strong gap up in all market indices owing to the news from Spain over the weekend. For instance, Emini S&P 500 index futures opened up +15 points. This gap up is painting a picture as though the Euro zone issues are resolved. The gap up is right at the resistance zone for Emini S&P. Keep in mind, the markets dropped down in heavy volume and rallied last week on weak volume. Some of the breadth numbers I keep track of have more room to the downside before we could resume the uptrend. However, the next few days of market action will determine direction of the move.

Stocks looking Tired

Yesterday the Markets looked like a rocket launched to the moon. Like I mentioned in my previous post, sufficient thrust was lacking behind the propulsion. Today, the rocket seem to be stalling. SPY hit resistance and reversed course. The stocks in my watch list all appear to be extended or very tired. I am more inclined toward a downward follow through than a continuation move upwards. But, the market action dictates the next course of action. If you are baffled by the market action, the best course is to sit in cash. Learn to accept the risk and take a loss. Anything can happen in the Market. Markets are driven by news and rumors day to day now. This is the kind of environment where experienced and nimble traders thrive while the novices or not so nimble taken to the cleaners.

Market on a high!!!

Markets rebounded from Friday's heavy selling partly due to rumors and hopes of monetary stimulus from the Fed. For such a huge rebound, the breadth in terms number of stocks participating in the move did not impress. Having said that, this is one of the largest bounces we have seen in recent days and SPY for instance took out Friday's sell off high. So, what has changed from Friday until today to justify this bounce? A few fed officials yapped. Yet you have to take this bounce for its face value rather than forming any opinions. Mr. Bernanke is set to appear before Joint Economic Committee of congress to testify tomorrow . So, expect some more strange action from the Market if you don't already experience it. For more chart perspective on indexes follow the link to Fallondpicks.com

SPX - A picture is worth a thousand words

SPX cut through 1290 zone effortlessly like a hot knife through butter on very high breadth.  The next possible support we are looking at is the 1248 zone which is 50% fib retracement of oct'11 low to Mar'12 high.  The breadth numbers I follow has a lot more room to the downside.  So expect this choppy action to continue which should ultimately resolve in a panic situation for the market to put in a tradable bottom.  However, given the kind of selling we saw on friday, the next logical move for the market is probably a dead cat bounce.  some of the charts on my watch list which were looking good until friday are now looking the exact opposite inviting to short.  Any bounce in this market should be sold until proven otherwise.