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After hearing that the SEC has decided to ban short selling (link here) I have really hit my limit. It doesn't matter anymore. Nothing matters in this market. I might as well throw my computer out the window, along with my charting software. The government has completely taken over our stock market, and if you thought the volatility and manipulation was bad before, just wait for what you are about to see. I guess we haven't just converted to socialism, but instead have moved all the way to a communist government. Way to go guys! Keep up the great work!

Honestly, this type of action makes me just want to take all of my money out of my account and just not play this game any longer. It is so rigged it is unbelievable. And I am not saying this because I am about to lose a ton of money or being hurt financially in any way. I am completely in cash and have been successful this year (up close to 90%). We could rally big tomorrow and I honestly just don't want to even participate if we do. The United States Stock Market has officially lost all credibility in my eyes. Maybe it never had any and I was just naive. But the steps today are absolutely ridiculous. As Bear Mountain Bull states, perhaps it is time for a worldwide boycott of the stock market. I am for that.

I haven't even mentioned the plan to give $400-700 billion more of taxpayer money to the stupid banks that caused all this problem that was "leaked" today. From everything I read, the idea proposed today involves setting up a taxpayer-backed fund for banks to dump their bad debt upon. We get to pay for it. Sounds good to me, how about you??? This is in addition to the $80 billion of taxpayer money given to AIG, and the potentially trillions of dollars used to bailout Fannie and Freddie. And we still haven't mentioned the Bear Stearns fiasco among others.

I hate to say this, but I think we may be witnessing the beginning of the downfall of our great nation. I sincerely hope I am wrong. By doing this ridiculous crap, these idiots are basically admitting that things are much worse than they are letting on. They are panicking, and in all likelihood will actually increase the odds that what they are trying to prevent (a total crash) will actually occur. By taking away short sellers, they have just eliminated built-in buyers for stocks. This constant intervention is in no way what our country was founded upon.

I wonder how many times George Washington and Thomas Jefferson rolled over in their graves today. This is truly a shame.

Good evening, traders. The question of the evening is "have we seen the bottom after today's action?" Let me answer that with an emphatic "I don't know". I don't think anyone does. How many people called a bottom on Wednesday only to watch the market fall 500 points yesterday? It is too early to know for sure if this is the bottom. There are things that I see that make me think it could be, and there are other things that think we still have more downside to come.

On the plus side, volume was the heaviest its been the past week and looks awfully climactic to me. Combine that with the reversals put in, and the possibility of a bottom is certainly there. The buying interest today in terms of 4%+ breakouts was as high as I have ever seen. The VIX also spiked above 40 today before reversing hard as well. All of these could signal a possible bottom.

S&P 500, Nasdaq
VIX

On the downside, let's not forget just two days ago, when the market rallied a huge amount late in the session on rumors about AIG getting bailed out. A lot of people figured (and I have to admit I was in this group) that we would continue higher for at least a little short-covering rally. The next day (yesterday) we were down instead 500 points. I also don't like the fact that this entire move was triggered based on a RUMOR put out by those fine, upstanding journalists at CNBC. People want to lock up short sellers??? How about locking up Charlie Gasparino, first for the Ambac crap he pulled earlier this year, and now for putting this out there. As long as it is the shorts getting hurt, I guess it's OK, huh? (By the way, I have been in cash for the past two weeks, so I am not biased here)

So overall, I am leaning to more upside here but would not be surprised by anything. Seriously. A 500 point up day or down day tomorrow would not be a shock. The amount of volatility the past few weeks has been staggering, and there is no reason to think that will end all of a sudden. The chart below shows the buying/selling interest that I do as part of my scans each night. Over the past eight sessions, I have had four days of over 1000 4%+ breakouts(1) or breakdowns(3). A normall high reading is around 300, and I have not had a 1000+ day, either positive or negative, this entire year up until the past eight sessions. Because of this, I am expecting more jaw-dropping swings to come. This volatility is also a reason I plan on waiting for a true, IBD follow-through day before getting heavily long in this market. From my perspective, there is still just too much risk out there and I would rather wait for some confirmation of a bottom, even if it means missing out on a few percentage points in a move.

Buying/Selling Interest

Here are some of the charts I am watching from the long side. I wish I had more, and I wish more of the ones I have below had max BOP levels that told me they were really being accumulated, even in this mess of a market. Unfortunately, they don't, and we as traders have to take what the market gives us. I am also not seeing a ton of high quality IBD type stocks setting up. Am I planning on going out tomorrow and buying a lot of these? No. I want the market to prove itself a bit. Again, I am planning on being patient here and not jumping the gun, therefore hopefully avoiding a possible whipsaw that is always a possibility in this market. If this is the bottom, then there will be plenty of time to get fully invested on the long side.

STSI, CRDC
PRAA, CLNE
SAPE, THFF
SMCI, CRD.B
RMG, ROCM
UA, BBBB
ENSG, WBSN, BRKR, AMMD
HA, MED, AMFI, FSYS
VAR, CHS, BECN, CNQR
All Charts from Telechart 2007, Courtesy of Worden Brothers, Inc.

Overall, today was certainly a great day for the bulls, but I am going to temper my enthusiasm for the time being until we see if this can be maintained for more than thirty minutes. If we do bottom here, there are so many shorts out there that a rally could turn out to be very powerful, so it pays to be ready for it. I would frankly be all for a rally starting here - I am bored out of my mind right now just sitting and watching, even though I know it's for the best. But we also have to remember today's move took place in less than an hour, was caused by a rumor, and was most likely led by monster short-covering. We saw something very similar two days ago and it amounted to absolutely nothing. All in all, there is nothing from today that I saw that tells me this market is about to get any easier. Oh yeah, options expiration is tomorrow. Be careful and good luck Friday.

Tags: CLNE, PRAA, STSI, CRDC, SAPE, THFF, SMCI, CRD.B, ENSG, WBSN, BRKR, AMMD, UA, BBBB, HA, MED, AMFI, FSYS, VAR, CHS, BECN, CNQR

Wow, what a day! Another crazy session on Wall Street today, as traders bid up stocks early after selling them so hard the past few days on news of a worldwide injection of liquidity by central banks. Stocks started very well but faded as the morning went on, and by lunch time, they were slightly negative. This reversal certainly did not look good. Stocks hit lows around 1:00 and slowly did bounce back from there. Around 3:00, a rumor put out on CNBC about the government talking about a Resolution-trust type solution to the current crisis caused shorts to run for cover, and the market spiked up in a powerful way. The market finished strong near its highs for the day, with all indices posting gains of at least 3.5%.

Technically, today was a very strong showing once again, much like Tuesday. Let's just remember however what happened yesterday after so many people (including me) were expecting a continuation of the bounce following Tuesday's reversal. The markets closed right near their July lows, which I guess will be heavy resistance. If we move lower tomorrow in a powerful way like Wednesday, then I still think the fear and panic that we have seen recently comes back into play and it gets very interesting. If we move higher tomorrow and follow-through, then maybe we can bottom here.

It is days like today that make me happy I have stayed out of the market the past week or so. I don't think I am arrogant enough to think that I would have traded these massive swings properly and made a ton of money in this volatile environment, especially with me not being at my computer a lot now that I am back at work. More than likely, I would have been chewed up and spit back out by the market, wrecking not only my account but also my confidence so that when it was time to start making moves, I don't know if my mindset would have been where it needed to be. Sometimes cash is the best position for lots of reasons.

I am taking the same approach to today's action as I have the rest of the week - I want Wall Street to prove itself to me. I will follow the IBD method right now in terms of looking to get long. I actually wish the fear and panic would have gotten worse (and who knows, it still may) because the further stretched we get and the more extreme the fear gets, the better the bounce will be whenever it happens. If we bottom here though, that's fine. We will probably get a nice rally, especially going into the elections. But I will wait for a follow-through day as early as next Tuesday. I may miss some of the move if we get one, but at the same time, if we get a huge reversal lower tomorrow and have a mini-crash Monday, then I will miss out on some major losses as well. I do find it amazing that a RUMOR put out by CNBC can make the market move several percent in the course of thirty minutes. That in itself tells me all I need to know about this market and how news-driven it still is.

I really don't have a good feeling either way here as to if this is the bottom or if we still have further to fall. I have been compiling a watchlist of stocks that I would look at if we do get a new rally going (unfortunately it's not that long) and plan on putting some of those up tonight - not as buys, but as stocks to watch. I also continue to look for shorts that might work out if we head lower. Just like I said last night, be prepared for anything.

Tags: CNBC, XLF, Market Rally

Another quite crazy day, as AIG's bailout did nothing to rally the bulls early on. Futures fell throughout the pre-market session, and when the market did open, it did forcefully to the downside. They tried to bounce a bit but couldn't get much past the open, and from there they sold off hard into the lunch hour, with all major indices down at least 3% once again. Stocks did find a temporary bottom at 12:00 and tried to rally for about an hour, but couldn't hold onto those gains and sold back off, testing and in some cases slightly breaking the lunchtime lows. Support held there, however, and the bears were squeezed a bit back into the close. That is until 3:30 came, when stocks sold back off rather hard and finished at the lows for the day with very large losses once again (over 4%). Another really bad day for this market.

I once again did nothing today, as a huge gap down didn't allow any low-risk positions to be put on anyway. Trading remains difficult here unless you are a day-trader, and I can't be that right now, so I just have to remain patient. It is way too late to short here - I thought we would bounce a bit today - but I would be very careful trying to buy dips. You may be able to play some intraday bounces on the short side, but if you do, I have not done my scans yet, but I would guess we are getting closer and closer to extreme measurements in a lot of areas. The VIX spiked again and is closing in quite quickly on the 40 level that is pretty important in past bottoms.

If you are not already short (and to be honest, I probably would have covered my shorts anyway by now - I don't know that I would have the patience or guts to sit through all of these swings without taking most of my profits), there is nothing to do here other than sit tight and watch history unfold before your eyes. And I do get the feeling that we are witnessing history. It is going to be a very interesting next few days, especially heading into the weekend.

The only good news out there right now is that this type of action will bring us closer to a very nice, tradeable bounce and perhaps even a more serious move higher. I have no way of knowing when that will happen - I will keep an eye on the same measures I normally do - but history shows that when capitulation occurs (and that does look to be where we are headed), markets are usually higher several months afterwards. And if we don't bounce soon after this carnage of this week and possible further carnage ahead of us, well, then, we probably all are screwed anyway. Let's hope that doesn't happen. No charts to put up tonight - no sense in trading right now, at least for my style and from my perspective. If I have any interesting observations or thoughts, I'll post later. Good luck Thursday.

Tags: VIX, Market Crash

I am not going to put up any charts tonight because I continue to think technicals don't matter as much in this current environment. There are just too many news events that are going to drastically affect the near-term course for this market to put too much emphasis in charts. Once we get past all this news, then I think the technical side of trading will become valuable once again.

In terms of AIG, it seems like everything hinges on what happens to them. I found this bit on Bear Mountain Bull - he posted it from Financial Sense and written by Frank Barbera. I thought it was a great description of where we are at right now.

"For the last few days, the US Financial system and perhaps, the global financial system, has moved to the brink. Events surrounding American International Group (AIG) seem to have brought this crisis to a head. A global titan with operations in over 130 countries, AIG’s insurance business has counter-party risk relationships with virtually every major institution in the world. Words probably cannot accurately depict how serious a problem the implosion of a company this large would be for the greater financial community. Thus, it is putting it mildly to suggest that at the moment, a great deal depends on whether AIG can receive the funding it needs to avoid a further downward spiral. Such a spiral would undoubtedly trigger a torrential chain reaction of counter party defaults in the CDS market which stands at more then 40 Trillion in notional value. In the case of the demise of AIG, the word ‘melt down’ is of the few terms that would apply with ripple affects spanning the globe.

Thus, as markets wait to see if AIG can bypass its liquidity problems, it is very clear that a large move, either straight up (sigh of relief), or straight down (abject terror) is in the offing."

I guess Warren Buffett was right when he said derivatives are "weapons of mass destruction".

So what do we as traders do? Well, for me, I think think staying in cash is still the best strategy here. I mean, really, do you want to be short C and WB when/if it is announced that AIG has been bailed out by the government, which no doubt will cause a large short-covering rally??? In the same vain, do you really want to be long a bunch of stocks when/if the government keeps its recent backbone, doesn't back AIG, and the company files bankruptcy, setting off a chain reaction of let's just say very bad things, causing the market to really tank??? I know I don't. There is still just too much risk out there relating to these news events, so therefore, I think having the discipline to stay out of things until the path becomes clearer is the right move right now.

In terms of my scans, I did see a few more longs pop up tonight but my BOP scans hit a new low for the year on the long side - not really what I want to see if we were really at the start of a new bull market. I see a few that I like the look of - CLNE, STSI, EHBI, ICAD, TACT, NPSP - as possibilities. Overall, the quality of longs I see is not good, however, and until I see more set up, with really good volume patterns, I can't get too optimistic here, even with a bullish-looking reversal put in today on the indices.

It is possible we put in a short-term bottom here, and again, if the news somehow plays out positively the rest of this week, then it probably will be a bottom. However, check out a chart of any major index and look at January 9, 2008. The market was down big the previous day, opened much lower, and then reversed to put in a large gain for the day. Sound familiar? It didn't quite work out for the bulls, however, as it only took four more days for the that reversal bar to be broken to the downside and another very sharp move lower took place. That could certainly happen here, with us getting a true washout that gives us a good, tradeable bottom.

I guess what I am trying to say is be open-minded and be ready for anything. I have a watch list of longs that I will watch, and if we get some resolution of the news issues, I would be OK starting a few positions in them to catch an upswing in the overall market. I am also watching some shorts that I will focus on if we make another move lower. I don't have a bias right now and am ready to go when the market tells me it is ready to go as well. Good luck Wednesday.

Tags: CLNE, STSI, EHBI, ICAD, TACT, NPSP, AIG

Quite a wild day once again on Wall Street, and another one that shows why staying on the sideline is a smart move right now. Things looked bleak once again before the open, as futures fell and stocks did open lower. However, the lows were quickly put in during the first ten or so minutes of trading, and from there stocks rose throughout the morning, although in a very choppy manner. Around 11:00, there was a sharp pullback and stocks went sideways until the Fed released their decision at 2:15. When they held rates steady, the market initially sold off hard, but as is usually the case, the first move was a fake out and stocks reversed higher quickly. They pulled back again a bit in the last hour, but recovered and finished with moderate gains at their highs for the day. Volume was very strong today.

Technically, today was certainly not a surprise given the selling from yesterday and some of the fear measurements that hit high numbers. The bullish reversal looks impressive on a daily chart, especially since the Nasdaq broke through its July lows and then recovered. So is this the bottom? Anything is possible, I guess, but I still think we are not done going down here yet. Where are the charts setting up that might tell us a move higher is on the way? Was yesterday really capitulation? Was that the best the bears could do? These are all questions I would ask myself before considering a bottom here, and unfortunately, most of the answers I come up point to more downside. Although the selling was strong yesterday, I don't know if it was panicky where people were just trying to get out of stocks at all costs. Panicky selling would not have produced a bounce ten minutes into the session that lasted for several hours like happened yesterday. There was only one reading last night (put/call) that pointed toward a possible bottom here. That's not enough in my opinion. I would expect more from a true capitulation day. That's my two cents, but maybe I am showing my inexperience here.

I would also point out that the true market reaction to a Fed decision often takes several days to reveal itself, so we'll see if tomorrow is a reversal of today's reversal.

There really isn't much else to say. I still don't know news-wise that anything was resolved with AIG, and this situation sounds eerily familiar to the Lehman and Bear Stearns events. Unless the Fed bails AIG out, then I doubt any loans they get will solve their problems. They will just delay the inevitable fall a little longer, making it even more unpleasant when it happens. And if the government does come to the rescue once again, that opens another can of worms that will affect this economy for much longer than the next week or so. My game plan from last night remains the same - I will be looking to possibly get short a few names as this market bounces as those stocks approach resistance levels, but will not force anything. If my outlook changes after going through my scans, I will let you know, but as of now, I am not expecting any. Good luck.

Tags: XLF, AIG, LEH, Fed

Good evening, traders. Here are the major indices. The Nasdaq is near strong support levels but the S&P did close below its July lows. A bounce is possible here at any time, especially when you consider the spike in the VIX today and the fact that the put/call ratio spiked as high as 1.70 this morning and stayed above 1.40 all day. There is certainly some fear out there, although I don't think as much is as needed to put in a true bottom. I have a feeling the Fed decision tomorrow could cause a quick, short-covering spike, but again, I think we have more downside to go, perhaps a significant amount, especially if the Nasdaq and Dow clearly break their support levels soon. Any bounce will just be postponing a heavier fall from here.

S&P 500
Nasdaq

One reason I think we have further downside to go is that besides the put/call ratio, there are not many signs of extremes in the measurements I follow. My Market Map is nowhere near extreme levels, and the T2108 is just now reaching oversold territory. I would also look for the VIX to get up near 40 or even 50 for a really solid, panic-filled capitulation bottom to possibly be put in. Going through my scans, I was kind of shocked at how little major damage I saw done to charts other than the obvious suspects in the financials. Commodities were hurt, but I really didn't see a whole lot of stocks breaking to new lows on heavy volume. Because of that, I have to assume we have much further to fall before we can even think about looking for a bottom.

T2108 and VIX

With the Fed decision tomorrow and myself having no clue as to how the market will react to it, I plan on sitting things out once again tomorrow. If the financials do rally, I may look to get short a few stocks near resistance points that would give me clear stop loss levels to get out at just in case. I put the XLF below to show where I think it may fail on a rally attempt. I am watching WB, BAC, and C as possibilities as shorts with the same overhead resistance areas as possible entry areas. If they don't get this high or don't rally at all, I will not chase and instead will just stay in cash.

XLF
All Charts from Telechart 2007, Courtesy of Worden Brothers, Inc.

There are a few other setups that I am watching but again am going to wait until some of this news passes and is digested by the market. (WGOV, RBCAA, HOT, MGM, SNDA, BIDU, MSTR, CREE, PENN, OEH, FCFS, FSLR, SQNM, VISN, NETL, GHM, JCG, GTLS, IPHS are on the short list.) We're still in a market where news is trumping all things sensible, including technicals, and it pays to be extra careful in that environment.

Tomorrow will likely be quite volatile once again, so the mantra remains the same. Cash is the best option right now (unless you are already short before today), but if you do have any winning positions, I wouldn't let them run too long without taking profits. Whatever you do, be careful. This is a very dangerous period of time and if you are not careful, you can ruin your account quickly. No need to be a hero. Good luck Tuesday.

Tags: WGOV, RBCAA, HOT, MGM, SNDA, BIDU, MSTR, CREE, PENN, OEH, FCFS, FSLR, SQNM, VISN, NETL, GHM, JCG, GTLS, IPHS, BAC, WB, C, XLF

With all of the crazy headlines coming out this weekend, today promised to be quite volatile, and the markets didn't disappoint. Futures were down big pre-market (3% area) but when the market opened, only the Nasdaq was down big. After about ten minutes, the S&P and Dow caught up, and stocks hit their morning lows around 10:00. From there, stocks bounced a bit, particularly the Nasdaq. They faded into the lunch hour, bounced again, faded back to test their morning lows around 2:00, and moved sideways a little. Finally, around 3:00, the morning lows were broken and the selling intensified. Stocks tried one last time to bounce around 3:30 but couldn't and fell sharply from there into the close. Across the board, losses were at least 3.6% (Nasdaq) and went as high as 4.65% on the S&P 500. So as expected, a very volatile day overall and with all of the news events coming up (namely the Fed) I am expecting the volatility to continue if not even increase the next few days.

Technically, as bad as the selling was today, some important technical levels have still not been totally breached. The S&P 500 closed just below the July low around 1200, but the Dow and Nasdaq still have a little farther to fall before breaking these key levels. The 2160 area on the Nasdaq could act as temporary support and 10,820 on the Dow may act as support. I think we could get a technical bounce at some point soon but that would just be a chance to get short. To be honest, though, in this environment, technicals may not work like they normally would. The VIX did get up above 30 today (31.08) but if we are going to get some capitulation here over the next few weeks, we need much more fear than that. I don't think there is any doubt that there is more downside to come in the next few weeks.

From everything I observed today, I am glad I did not trade. Perhaps my quotes were just being weird, but for the first ten minutes of trading, things looked relatively calm. The Dow was only down around 100 points. Then out of nowhere my quotes started flipping out and the Dow and S&P dropped about 2%. It was crazy. I just thought to myself - what if I had money in the market right now? I would probably be going crazy myself. I can't even imagine what it was like to try and get orders placed. I also saw a lot of gaps that immediately bounced, probably trapping some late shorts that wanted to try shoring the open. I'll repeat myself again - it is just too tough out there right now. Stay away and wait for a better opportunity.

The one thing about trading that I know I tend to forget and I am guessing many traders do also is that there is nothing that says you have to trade all the time. If the market wants to act in a ridiculous, untradeable manner, that's fine. It doesn't mean I have to join in the party. Being in cash is a position, and a lot of times it is actually the best position to be in. (For instance, now!)

If I had to make a guess at what happens, I think the Fed gives in and lowers rates tomorrow, which may or may not cause a quick short-covering rally. If I was lucky enough to be short today, I probably would have covered a lot of my positions during the session. I don't think a bounce will last - I still think eventually we will strongly break these July lows (after perhaps several attempts) on all indices and move lower in hopefully the final leg of this bear market.

In terms of trading here, I will continue to do my scans but as I mentioned earlier am happy being in cash and I'm not in a rush to do anything. Sure, I would like to get short some financials, but not here. I will wait for a bounce, most likely up to their recent lows, where at least I will have a clear stop loss. I am looking at XLF around $19.60. If the Fed cuts and we get a reflex bounce from that, that's where I may look to add some small shorts. If they don't bounce, I will just miss the trade and stay in cash.

We are in an environment where capital protection is #1, #2, and #3 on the agenda. A better time will come (hopefully) and when it does, I want to be ready to jump on the opportunities that present themselves. I hope no one is considering buying these dips here - definitely not smart right now. We are nowhere near a panic-selling extreme. Instead, I think the smart play is simply sitting back, watching and observing this action, and being patient. If we happen to get a quick bounce, I would probably look at shorting, but in no way with a big portion of my portfolio. I will be back later to look at the indices and a few charts that I will watch for possible short entries if they bounce. Good luck out there.

Tags: XLF, VIX, Market Crash

As of now, it seems like Hank Paulson is actually going to keep his word (for once) and not offer taxpayer money to help finalize a Lehman bailout. Futures are down significantly (Dow -293). I read other bloggers talking about a market crash tomorrow. Ergo, the title for this post seemed appropriate to me.

I have no clue what is going to happen tomorrow. There is still a lot of time between now and tomorrow's open, and a late-second, government-sponsored plan still wouldn't surprise me. Right now, this situation reminds me of the Bear Stearns event in January, and that turned out to be a short-term bottom. In no way am I suggesting we are near a bottom in this. What I am saying is I am going to wait until tomorrow opens before predicting what is going to happen, because this market has been as unpredictable as any I can remember.

I have to say I am happy to be in 100% cash, although obviously part of me wishes I was short at least a few financials going into Monday based on what things look like now. The risk from my perspective was just too big to be short or long going into this weekend - how many of you really thought there wouldn't be a government-funded bailout by this time when the weekend started. I knew I did not want to step into a Monday morning gap like we had with the Fannie-Freddie bailout that would give my account a big hit. Since I have had a pretty good year up to this point, I am focusing more on holding onto and maintaining my gains rather than grow my account agressively, mainly to the market atmosphere. Perhaps that's the wrong mindset, but it is right for me. If good opportunities come up, I will look to continue to grow my account but right now, I just don't think there are many of those out there.

Tomorrow, it looks like many traders will small fortunes if they were short, and others are going to take massive hits to their accounts and possibly their life savings. I give those traders who were short great credit - they have more guts than I do. I will likely continue to just watch tomorrow from the sidelines and use it as a learning opportunity. I was only 10 years old when the 1987 crash occured, and I did not trade through the 2000-2002 bear market, so these panic situations (if we do indeed get one) are something that I need to experience first before trying to attempt to trade them correctly.

If you are a risk taker, and want to try and catch more downside, I would focus on the brokers and big banks that haven't bounced as much as the others. Some banks like WFC and USB have held up fairly well. I would instead focus on names like C and WB, both of whom's charts look poor. Other names I would watch are FCSX, IBKR, GS, MS, LM, and BLK.

I would also try to take profits when you get them. No one has any idea how this whole thing will exactly transpire, but it wouldn't surprise me we get some wild swings up and down which can wipe out any profits on shorts you get very quickly. It is going to be a very volatile environment, and in that atmosphere, I wouldn't be greedy.

Whatever happens, good luck. The potential exists for this to be a historical event in our nation's economic history, and no matter what your outlook on the market is, let's hope we can survive it over the longer term as a country (and learn some lessons from it as well.)

Tags: FCSX, IBKR, GS, MS, LM, BLK, C, WB, WFC, USB, LEH

After going through my scans this weekend and all my watchlists, my feeling are pretty much the same as they were on Friday. I just don't see myself doing much trading this week. Even if there were not all the questions I mentioned (Hurricane Ike, gas prices, Lehman, the Fed decision), there just aren't any really good setups out there that I see. There are a lot that could work in a few days, but only if certain other things happen news-wise. Again, that is what I call gambling and I don't like doing that. I also forgot that this week is options expiration, and there are always games played these weeks.

Technically, I put the index charts below but I have a feeling all of these news events will trump the technicals. The S&P is very close to what should be heavy resistance but the Nasdaq is kind of more up in the air, with no clear technical signals that I see.

S&P 500, Nasdaq

On the long side, I continue to see very few stocks with great fundamentals setting up great chart patterns. I like to use the BOP indicator in Telechart as a key signal in terms of looking for longs, and my BOP scans just aren't giving me any new charts. In fact, the number of stocks in my BOP scans have been at lows for the year for about the past three weeks - typically only 50-70. When the number of stocks in this scan start increasing and get over 100 again(which is where it was at back in April and May), perhaps I will start looking harder at longs. Until then, I have to pass for the most part. My long watchlist is below and you can see how small it is right now.


I am still focused totally on the short side but don't see many great setups here either. What I am seeing is a lot of commodity stocks (namely the coals and steels) that are bounce a bit on lower volume and will soon approach heavy overhead resistance. I put an example of the type of setup I am seeing below.

CLF, WLT

Here is the list I am watching: CLB, CLR, GNA, AGU, CMI, EGLE, MOS, CF, CMP, ESEA, GMXR, CRZO, ACI, MON, HK, PVA, CWEI, PCX, and ZEUS

So why do I have a problem with these? Well, if the Fed decides Thursday that they need to throw these stupid banks another bone and lowers rates, the dollar will get hit and commodities will likely rally. So although I do think these stocks will have a tough time getting through these levels, I would rather wait to see what the Fed does rather than getting caught in a surprise squeeze that gives me some quick losses.

Other than commodities, I do see some other stocks setting up bearish flag patterns from several different sectors. I am only putting up a few charts because of what I've mentioned earlier - I think this week could be among the most volatile we've had in a long while and establishing new positions may be difficult.

VISN, GTLS
CFSG, STEC, RBCAA, IPHS
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

On Friday, I asked for some thoughts about this market and if it is stranger that bear markets of the past. During my weekend reading, I found an interesting post from Rob Hanna at Quantifiable Edges that seemed to at least give me some solace that I am not going crazy. It is the market, and we are seeing action that, as Rob stated in his post, is "nearly unprecedented."

Part of being a successful trader is knowing when to be in the market heavily, but also knowing when to be on the sideline doing absolutely nothing. I could be wrong, but I think this week is a week where being on the sidelines might be better unless you are a daytrader. The current situation seems more like gambling to me than trading. If you decide you have to trade, I would recommend taking profits quicker than you normally would, because you never know when a reversal will kick in, taking stocks higher or lower in dramatic fashion. With all of the news events this week (especially the Lehman news which I think could have a severe impact on the market Monday - just don't know if it will be positive or negative) I will likely have my screen turned off and take it easy. Good luck if you decide to make a go of it.

Tags: CLB, CLR, GNA, AGU, CMI, EGLE, MOS, CF, CMP, ESEA, GMXR, CRZO, ACI, MON, HK, PVA, CWEI, PCX, ZEUS, CFSG, STEC, RBCAA, IPHS, VISN, GTLS

Today was another roller-coaster ride on Wall Street - down 100, up 100, then down 100, and finally up 100 again. All the while, the market actually went nowhere, and because of that, I am glad I didn't trade today. Stocks ended up pretty much flat, and I really don't feel like analyzing the intraday action because it was just more of the same.

I am not going to analyze the market technically right now either because I think there are going to be other things happening soon that may override any technical outlook that the market is showing us. The reasons why are stated below.

I did virtually nothing today other than get stopped out of my CREE short for a very small gain (less than 1%). I even turned off my streaming quotes. I am now back to 100% cash, and that is probably a good thing. After yesterday's bounce, I had no desire to chase the gap lower with shorts. Unfortunately, there aren't any longs to check out either, so back to the sidelines is it for me. The real reason I am sitting out is because we are at a point over the next five days (including the weekend) that a LOT can happen and I have no desire to bet on possible outcomes that I have no idea about, especially in a market that is so news-driven to begin with.

First this weekend is Hurricane Ike. It looks massive and no one knows how this will play out. Obviously, I would assume commodities will be affected, but I don't know how. I am sure many people made big bets before Hurricane Gustav, and some probably won big and some lost big. I don't like to play the betting game however. Regardless, say a prayer for those people on the Texas coast that this storm will slow down and not cause as much damage as expected.

There is also the whole Lehman/Washington Mutual mess and the possibility of another government bailout. I know that Hank Paulson said he was "adamant" (according to Yahoo Finance) that no taxpayer money would be used for any of these possible deals, but let's be honest, if you believe anything Paulson or any of his Wall Street cronies say after the past nine months, then you are either an idiot or just extremely naive. If a deal comes down, I am sure the markets will react positively, just because that's what they do. I am guessing that right before I watch my Steelers take on the Browns this weekend, we will hear some news - it is a Sunday night, and that's when the PPT likes to come in on their white horse the most.

Finally, we have a Fed meeting on Tuesday. I, like every other trader, have no way of knowing what Big Ben has up his sleeve. There is talk, however, of the Fed lowering rates, and it wouldn't surprise me at all. The dollar has rallied strongly while commodities have taken a hit, so why not throw Wall Street and the failing banks another bone? As always, it isn't even that important what the Fed does - the reaction is the important part.

All in all, it looks like a real mess out there, and with all of these news events coming to a head at the same time, I don't think I want to participate in what I would guess will be an even more volatile market than we've had the past few weeks. I may end up missing part of a big move, but there are just too many question marks out there for me to make any big bets. I just can't do it. More than likely, we will probably move sharply higher then sharply lower next week (or vice versa) and end up pretty much at where we are at now, not really going anywhere. That sounds fun, doesn't it?

I really do believe the best place to be is on the sidelines right now. I thought last Thursday was going to be a meaningful day, but the fact that it led to nowhere means this market is still not presenting a lot of good opportunities to make money. Hopefully it will someday soon. But right now, at least for me, there are way too many question marks out there about way too many things, and because of that, I recommend treading very carefully here. If I have any other thoughts or observations, I will be back this weekend. Take care.

After going through my scans, I am guessing I may not be doing much trading tomorrow to wrap up the week. My long scans continue to be jokes for the most part. The high growth, lower float, IBD-type stocks that I like to go long with just are not out there right now. Now, if you want to play a stock like GM, which will likely declare bankruptcy soon unless our friendly government comes to the rescue once again, be my guest. I just can't do that. There are a few stocks that have stayed on my watchlist consistently - CLNE, TACT, ICAD - but that's about it. Here are a few others that could work as a possible swing trade but none of these are great.

ATRO - forming flag pattern right underneath the 200 day moving average, and a breakout could let this stock run a little.

RJET - forming a cup pattern but the volume is all wrong on this stock.

UA - may run if it gets over the 200 day moving average, but today was a great day to do so and it did nothing.

SOL - if you want a possible bounce play, it looks like this has strong support at $12.

On the short side, I was surprised that some of the commodities still haven't bounced as strongly as I thought they would. If you check out the following list, ( MON, ANR, HK, CRZO, GHM, ACI, PVA, ARD, CLR, SWN, MOS, CLF, CMP, WLL, CF) you can see that many seem to be forming possible bear flag patterns. I would not short them right at this moment - I think that is too risky - but would consider these if they continue to just move slightly higher on much lower volume. The volume on these stocks the past two days is what really stands out for me - it has been quite low compared to recent selling volume.

I don't see a ton of other great setups. Some like ENER and VISN that I posted last night could work in another day or so if they continue to bounce slightly higher on weaker volume. Others I am watching include WGOV, FCFS, ONNN, MR, GTLS, WAB, RIMM, IPHS, and RBCAA.

There is a reason I didn't put up any charts tonight - I didn't see a whole lot going on that I thought was worth pointing out visually. After today, I honestly do not have a clue as to where we head tomorrow - I don't have a feeling one way or another. I would guess we bounce a bit higher because that makes the least amount of sense, but that is simply a guess. How many times can this market look terrible in the morning and then suddenly right itself out of nowhere? It seems to have happened quite a bit recently, and since it never amounts to anything, I think there will be a time soon when the market won't be able to save itself from the morning selloff, and we really do move much lower. It is just a matter of finding when that is.

Either way, I don't think I will be doing much unless some of these charts turn into very nice setups in a hurry. However, even nice setups are difficult to trade right now, so we'll see. I think we are back to careful mode, at least for the time being. Good luck tomorrow. I don't know about you, but I can't wait for the weekend to get here.

Tags: MON, ANR, HK, CRZO, GHM, ACI, PVA, ARD, CLR, SWN, MOS, CLF, CMP, WLL, CF, WGOV, FCFS, ONNN, MR, GTLS, WAB, RIMM, IPHS, RBCAA, ENER, VISN, ATRO, RJET, UA, SOL, CLNE, TACT, ICAD, GM

Futures were down big today pre-market on Wall Street, and traders responded accordingly, as a gap down was sold for the next 15 minutes, giving the market large losses. Both the Nasdaq and S&P 500 broke their recent lows and things looked bad. However, stocks bounced from there, moving higher all the way until the start of the lunch hour, when they pulled back. The pullback stopped around 1:30, where some a morning pullback provided support, and stocks rose back up from there. They pulled back rather significantly in the last hour until 3:30, when they rocketed upward out of nowhere and finished near their highs of the day. Volume was maybe a little higher than yesterday, but not overall that strong.

Technically, the market bulls pulled another rabbit out of their hat this morning, as things looked very bleak. The reversal was impressive, but as I said last night, until the market gets over its short-term moving averages, there is no reason to get bullish. Those levels I will watch are around 2265 on the Nasdaq, and around 1250 on the S&P 500. We are pretty close to those levels so tomorrow should be interesting.

I pointed our last night that the financials were sitting right at support, and a break here could be very important. They did gap down big this morning, but since I couldn't catch the gap down in financials, I waited for a bounce and did enter SKF at $121.59 and WB short at $13.88. Both of these were very close to resistance levels so I thought it was worth a shot. Well, of course, the financials continued to rally, and I got stopped out of both with small losses of 1.6% and 2.1% respectively. I went a whole day without trading SKF so I guess it was time to get back in.

I also was stopped out of my MON short as it rallied above its 9 day moving average for 7.4% gain. I was moving my stop down as I went but it is frustrating because I was up as much as 12% in this. It was also frustrating to watch the other ag stocks like CF and POT fall much farther and faster than this stock.

My stop was also hit with BIDU at $276.02, which gave me 5.3% gain. This was another one where I was up around 12% but thought it was worth holding for more gains. I have gotten away from taking profits quickly because this market showed all indications of making a major move lower and I want to catch that move, but right now, that patience is not working.

Right now this market is very frustrating, at least for me. After all of the trades I made the past week or so, many of which I thought were very good setups and I was excited about potential-wise, I am still at the same spot I was when this move lower started and I began making those trades. I don't know if I am just picking the wrong trades, not taking profits early enough, or just getting unlucky. For me, this market still kind of sucks, even though I thought last Thursday we were finally set for a tradeable trend lower.

Because of this, I want to ask traders that read this blog and are much more experienced than me (this is around my fourth year trading) and have been through market cycles before a question. Is this current environment just typical of a normal bear market, or is it less sensible, less smooth, and crazier than most? I can't remember a market that makes less sense than this one does. One of the biggest investment firms in the world appears to be going under, and what do financial stocks do? Nothing but rally completely off their lows for the day. Maybe I am showing my inexperience here. I wonder if the fact that this market has been interfered with so much by our government has something to do with it. I mean, we pretty much are a fascist/socialist state as of now - maybe the market is just responding to that fact.

I don't know - I continued to just be confused by the action of the last two months or so, and would love to get some thoughts from veteran traders if I am imagining this or are things really this messed up. I have read other bloggers call this the "Costanza Market" in honor of the character from Seinfeld that did everything that went against his good sense and judgement. This is not meant to be a rant, just a question. Maybe a better way to put it is "does anyone have a clue what is going on with this market?" I don't know how anyone can say Wall Street has not lost a ton of credibility this past year, and perhaps the crazy action is showing that.

Bottom line is that it continues to be very tough out there. The volatility and swings continue to be crazy and it seems like we are once again back to having only day trades work well. We may continue higher tomorrow, but if we do, the one bright spot is that there should be some very nice short setups that present themselves. I guess it is just a matter of if those setups actually work. I'll be back later with some charts.

Tags: RIMM, SKF, XLF, WB, MON, BIDU, CREE

Good evening traders. Just a few charts to look at tonight. No index charts but they are a mess. I think we could bounce a little still and I actually wouldn't mind that in terms of getting better entries into shorts, but as I mentioned earlier, the 1255 area on the S&P 500 and the 2285 area on the Nasdaq are where I would look to enter shorts on any bounce. We could just fall from here though as well. I think it will really depend on what the financials do from here - they are right at an uptrend line as well as their 50 day moving average - both key support levels. If they do break down, then I am guessing the market will start selling off once again in a severe manner, much like what we saw yesterday.

XLF, C

The commodity sectors are still stretched even with today's bounce, but I am really not interested in playing a bounce in these. I don't necessarily think the selling is over in all of these names. I would advise continued restraint in going long anything in this market, unless the indices stage a dramatic and powerful comeback out of nowhere.

Here are a few short setups that I will be watching tomorrow. I will also continue to watch some of the names I have posted the past few nights.

WAB, KALU
ENER, VISN
IPHS, XSI
All Charts from Telechart 2007, Courtesy of Worden Brothers, Inc.

That's about it for tonight. It was not surprising that the market tried to move higher today, but the bounce died late and volume was weaker than Tuesday, which shows again that we are just not in a good market here. We may slosh around here for a few more days and even move higher, but the trend is definitely down, and it pays to play it accordingly. Good luck Thursday.

Tags: WAB, IPHS, XSI, XLF, C, ENER, VISN, WAB, KALU

Another volatile day for Wall Street today, as even the pre-market futures were up and down big. LEH announced pre-market and immediately the financials and the futures dropped. I thought about SKF at that point but passed because I had to attend a meeting. I came back to see SKF down four points in a matter of a half hour. That early volatility carried over the regular session, as stocks gapped up, immediately fell, and then rose back to slightly new highs for the session. After about half an hour, sellers came back in and stocks lost nearly all their gains for the session, and it looked like we may have another bearish reversal. Lows were hit around 11:30 though, and stocks immediately shot up once again to their opening highs. Mostly sideways action from there until around 2:00, when stocks broke to new highs. They couldn't do much from there, pulling back and fading into the close, finishing with modest gains, although the Nasdaq outperformed a bit.

Technically, the bounce today does very little to change the technical damage already done to this market, and today's late fade kind of shows how weak things are right now. Until the S&P 500 and Nasdaq can clear their short-term moving averages (1255ish and 2285ish) I see no reason to do anything but manage current shorts and look to possibly add new short positions. In fact, if we do bounce up to these areas, that is where I will likely look to add, maybe even in the tech and commodity areas.

I only made one new trade today and amazingly managed to stay away from SKF for one whole session. My stop in IPHS was hit pretty quickly this morning at $30.67, which gave me a 3.2% loss on the position. CREE acted well and broke down as I expected, so these two kind of canceled each other out. I didn't get a chance to add to CREE however, so it is only a medium-sized positions. I took a short position in CFSG as well this morning at $9.89 on the break of the 50 day moving average. This also looked like it was going to act well, as it fell as low as $9.50, but when it bounced back to the 50 day, my trailing stop was hit at $9.96 for a 1.2%.

Right now, the trading is quite choppy and that makes it difficult to start new positions. Remember though that the trend is definitely down, and the mantra remains the same. Stay away from longs, be patient with shorts in terms of letting gains develop, and be ready to act if more shorts show up. After I go through my scans tonight, I will post any good setups I see. Only a few looked worked out from last night. Good luck.

Tags: CREE, CFSG, IPHS, SKF, LEH

Good evening traders. Here are the major indices and things look quite bad for them, particularly the Nasdaq. Today was just about the worst response to yesterday's action that any bulls that are out there could think of. I checked out my Market Map scans tonight and found some bearish numbers. The selling of today was much stronger than the buying of yesterday. The number of 4%+ breakouts yesterday was at 555. The number of 4%+ breakdowns today was 1084. So you can assume that today's selling was about twice as strong as Monday's buying. That is not good.

When looking at the indices, I noticed that the stochastics are not nearly as oversold here as they were back during the July selloff. I also am considering the news flow right now. Fannie and Freddie were hanging over the market for so long, and now that problem has been taken care, so to speak. I am having trouble visualizing the news item that is going to cause another short-covering spike in stocks right now. I mean, we already have much lower oil prices, and that hasn't been much of a catalyst. I don't know how many more investment banks the government can come in and rescue, especially after doing so with Fannie and Freddie. So what exactly is going to keep this market from heading much lower now? I think the PPT may be very close to being out of bullets, or they may be out completely already. Either way, I don't know how much longer the government is going to be able to prop this thing up.

I get the feeling that this selloff may be very severe and sharp, much like the January one, where the market basically fell off a cliff. That would be in contrast to the July selloff, which was much more controlled and deliberate. Back in January, I got out of shorts too quickly because I assumed the market had to bounce. It never did - it just kept falling farther and harder than I expected. I hope to learn from that lesson right now. All in all, things don't look good at all right now. Of course, with my previous paragraph, I probably jinxed myself, so be alert.

S&P 500, Nasdaq

Here are the two shorts I took today. I am anticipating a bit with both because neither really broke down as I hoped today, but I am looking for more selling tomorrow. If that happens, I think both of these have some room to fall.

IPHS, CREE

I was surprised about the number of short setups I saw tonight that actually still look decent. I figured most would be well out of proper shorting area, and while a lot are (mainly commodities and some tech - don't even think about shorting these areas right now), there are some that I think have the potential for a lot more downside.

After swearing off the financials last night, I am back to looking at them. Basically, if you read my post last Thursday, you know why. I thought the Fannie news might keep these up for good, but after today, I have my doubts. I might stay away from SKF and try shorting a few individual stocks instead, although if SKF clears the $116 area, I may reconsider that as well. Here are some charts I am watching, and I see some interesting opportunities.

CINF, FCSX, EVR, MORN
FCFS, SUSQ, WB, COF

The casinos also look interesting to me here. I can see them breaking down through these support areas and falling at least a few points.

MGM, BYD, PENN, LVS

Here are a few other random short possibilities from different sectors.

FFIV, AMED, CFSG, DV
All Charts from Telechart 2007, Courtesy of Worden Brothers, Inc.

I mentioned earlier that I would stay away from tech and commodities. In looking at these oil, coal, and agriculture stocks, I would not be surprised at all if they bounce soon. They are all VERY stretched to the downside. I am still in my MON short but may look to take some profits if I can get one more big move lower. I am a bit frustrated with this short because POT, MOS, CF - all are falling huge amounts and MON isn't moving as much.

Right now, we have a very sick market and one that needs to be played carefully. Don't outsmart yourself here trying to catch a dip, thinking a bounce has to come. Bounces can occur at any time, but they don't have to - stocks can also go much lower than you think they can, especially since we are at the start of this move relatively speaking. Shorting looks like it will continue to work, but don't be lax in covering if your short moves against you upon entering. If we do get a quick short-covering rally, they are usually very powerful and can give you losses very quickly. Also, don't be afraid to take some partial profits as you get them - I may do so over the next few days if we continue to sell off hard. Good luck Wednesday.

Tags: SNDA, ARBA, MORN, AMED, DKS, EVR, WB, FFIV, BYD, IPHS, AN, CREE, OEH, MGM, FCSX, SUSQ, MSTR, CFSG, LVS, AFAM, FCFS, CINF, MELI, DV, OFG, PENN, COF, WYNN, FDS

A pretty weak follow up to yesterday's big move higher for stocks today, as futures declined through the pre-market and stocks sold off steadily until around 11:10. They bounced slightly, but then sold lower once again through the lunch hour. They tried to bounce again after lunch, but that bounce was rejected at the mid-morning highs and it was nothing but selling from there. Stocks tried to bounce again around 3:15 but that was quickly sold as well and stocks finished very poorly, near their lows for the day. Volume was once again very heavy and appears to be heavier than yesterday.

Technically, today's action makes yesterday virtually meaningless from my perspective. The Nasdaq closed lower than its lows from Friday, and the S&P and Dow now look poised to do the same thing soon. Today's action goes with the BigPicture article I linked to last night that each one of these "government intervention to prop up the market" rallies have lasted fewer days and with less strength than the previous. There is no way to take today other than bearish, and I wouldn't be surprised the July lows are tested very soon by this market. The VIX spiked up to 25, which is interesting to me. It seems like this downtrend is in its early stages and with a VIX that high, perhaps this downtrend will lead to a true, panic-filled washout, putting the VIX up above 40 or so, and a real bottom that is tradeable can be formed. Let's not get ahead of ourselves however - that possibility is probably a few weeks away.

I made a few trades today, but I also passed on some earlier on in the session once again and still just don't feel like I am trading that well right now.

After stating last night that I was done trying to beat SKF, take a guess what I did today. That's right, I went in at $108.95, but was then stopped out at $106.60 for another 2.2% loss. Of course, it went right back up after my stop was hit. I set my stop tight because I know this can reverse quickly, and I didn't want to get caught in a whipsaw. I am not getting killed on these trades and all of these losses are small, but I know I am letting my ego get in the way here. I am trying to find the balance between getting back into a trade if it looks like it will work, but also letting go when I am "beaten" so to speak and admitting defeat. This is a good reminder for me of how important staying disciplined is in any type of market. Right now, I am fighting this stock and in a way letting it get personal, which is something you never want to do. That being said, I may try this again tomorrow, at least if it gets above its 200 day moving average. I don't know what news can now come out that would be good for the financials other than Lehman being taken over by another bank.

I almost took some profits on my MON short today but I decided to stick to my sell rules and held tight. I also added two shorts in the afternoon - IPHS at $29.78 and CREE at $21.00. Both of these are what I would consider momentum shorts, meaning I was anticipating in both of these a further breakdown, and they are short-term plays because they are already down a bit. It was weird to watch CREE sit literally at $21 for about an hour, but I think if that support is broken, then it can fall a few dollars from here. These are really the only type of shorts I see right now - you have to play breakdowns here although I really don't like doing that.

Things look quite bad here, but if this bear market has taught me anything, it is that things can always get worse. Right now, commodities and tech continue to get killed, and now perhaps financials will join the party. We'll have to see - I thought that last Thursday and it didn't work then. Maybe it will now. If they do start to fall further, then this market is in for some major selling, even worse than we are seeing now. That's what is scary. I'll be back with a few charts to watch tomorrow - I see a few setting up that I may look at taking as shorts, even though we sold off today. There aren't that many however - if you are not already short, you have to be disciplined and careful here. Good luck.

Tags: CREE, IPHS, MON, BIDU, XLF, SKF

Good evening traders. Here are the major indices. I guess it is possible the S&P takes off again tomorrow, and if that happens on heavy volume, then I may get more bullish here. It is possible for the market to follow-through on the third day of an attempted rally, but as William O'Neil states, "the first, second, and third days all must be very powerful." I don't know if I can classify Friday's action as "very powerful" or not. I am just laying out all the possibilities here - please don't take this as a belief that we are about to blast off.

The reason I am still very hesitant to think this is anything more than a typical short-covering rally is that the Nasdaq looks disgusting and individual tech stocks continue to get crushed. Take a look at GOOG. Yikes. I can't see this market rallying higher without tech participating.

S&P 500, Nasdaq

I also continue to see very few charts showing up in my long scans. If we were ready to take off, I think there would be a lot more nice charts appearing. Here are four that I am watching, but I really don't see anymore than this, and that is not good.

MELA, TACT, CLNE, UA

Here are some shorts that look like possibilities to me, but I am not seeing a lot of nice short setups here as well because the action the past two days has been so choppy and this has made individual charts very choppy as well. Commodities and techs continue to be the areas of focus for me, but many reversed lower today. This is why I was a bit frustrated today because I did not enter a few of these tech shorts when I could have. Because of that, there are just not many low-risk, high-reward setups out there.

WYNN, LVS, MR, AMED

As I try to figure out where we go from here, I have a few observations, mainly pulled from other bloggers.

The first is that the short financials trade may very well be over, at least the easy part. There is no way to know for sure, and some stocks could not close above resistance today (UYG, ZION, WBS, XLF, JPM, EWBC), but there is a good chance the easy money has probably all been made in this sector. I have been fighting this line of thinking for the past two months, and continued to play SKF with marginal success. But right now, these stocks aren't going down, even though common sense says they should. Maybe they will again in time, and I will be ready if they do, but as a trader, it is about time I recognize this and trade accordingly. I think I have let my ego get in the way here since I missed all of these moves lower earlier this year. Gio from IBankCoin has a very good post dealing with this topic that got me thinking about this. I need to focus on other areas from now on when shorting.

The second is courtesy of Barry from the Big Picture. He has a good look at all of the weekend government intervention that has occured this year, most of which caused Monday spikes in the market. None of these however has led to a new bull market, and the short-covering reactions have gotten smaller in both strength and duration. That is one big reason I cannot get very bullish here - a market that cannot rally on its own virtues and requires outside intervention to get going is not really a market I want to be part of on the long side.

Finally, as I am a little confused with this market right now probably like many traders out there, I wanted to post an excerpt from the Worden Report tonight(bold print added). I thought it was excellent.

"The Federal Government had nationalized "the American Dream." They took over American Home Mortgages. This is a little like the practice of some oil-rich Middle-Eastern countries distributing the wealth to the people. Everybody is automatically born rich. ..................

What best describes it or best forecasts the outcome? I certainly don't know. I have never seen anything like this. It's obviously not a financial panacea or even a mass palliative--or would we see continued plunges in prime tech stocks, including the likes of a Google plummeting 24 points today?

Can technical analysis give us the answers? Never forget that technical analysis is essentially a set of methods to gauge what the "smart money" is doing. There is often no smart money to emulate. Then back off and wait for signs that somebody is finding the right answers. I don't think anybody knows where this "bail out" will lead, and I'm willing to wait as long as necessary to find out."

That last sentence is the key for me. I think that we will head lower in a few more days after all the shorts that want to cover finally do so. I think we will eventually break the recent lows and head possibly lower than those lows. But these are just my thoughts, and I have no way of knowing if they will play out or not. I read comments from "experts" that this bailout has eliminated uncertainty from the market. I disagree - I think it has added even more uncertainty for me as a trader because I have no real clue how the market is going to react to this news. Even today was pretty confusing - a huge gap, a sell-off, then a rally up to those earlier highs.

Because of that, I am going to continue to stay light on my feet, taking a smaller number of trades and passing on a lot of possible setups if they look questionable at all. It is kind of boring, but I think it is the right play, at least right here. If we do rally more the next few days, I think these tech and commodity stocks may get back up to some nice risk/reward points that I may act on. If we fall from right here, I will ride the shorts I have lower. If I see nice charts start showing up in my scans, then I will look to start getting long. Basically be prepared for anything, because we are at a point where probably anything could happen. Good luck Tuesday.

Tags: CLNE, MELA, UA, TACT, LVS, WYNN, MR, AMED, UYG, ZION, WBS, XLF, JPM, EWBC

Wow, what a day! I had a feeling that today would be wild due to the huge morning gap and the Fannie/Freddie bailout, and I don't think the action disappointed from that perspective. The market did start the day with a massive gap, but that gap took the indices right up into some key overhead resistance that I mentioned last night, and that resistance proved too much to overcome. Stocks hit their highs around 9:35, and steadily fell from there all the way into the lunch hour, where some support came into play. They bounced a bit from there, drifted back down to test those lunchtime lows around 2:00, and tried to bounce again from there. They managed to get through intraday resistance around 3:20 and did run into the close, finishing near their earlier highs. Volume was very heavy as you may expect on a day like today.

Technically, I mentioned last night that the 11,450 level on the Dow and the 1270 level on the S&P as important resistance that I would have to see the market close above before looking on the long side. The late bounce did get the Dow over that level, but the S&P finished right below it after clearing it in the morning. It is certainly possible they climb over this level tomorrow, but I am still not looking to get long. The Nasdaq looks ugly and finished right in the middle of its daily range. In addition, most of the stocks I follow did not finish near their highs even with the late rally. Until all three indices are looking better, I can't get bullish, and right now there just remain too many questions. I am still of the opinion that this will prove to be a good opportunity to add shorts, but who knows?

I did not trade as well today as I hoped - all I did was add to my BIDU short at $284.85 and to my MON short at $109.16. These worked out well, but I passed on too many other great opportunities in hindsight. SOHU, WGOV, ENER, SINA, RIMM - I considered these as they rallied to their 9 day moving averages but passed. I just didn't feel comfortable shorting this open because I expected more irrational exuberance to push the market higher for a few days. I didn't think the gap would be sold off so quickly. Only one stop was hit today - CREE at $22.30, which gave me a small loss. It was a small position, however, so no big deal. I also went back into SKF again at $108.56, but this was another trade I waited too long on. I was stopped out at $105.80 as it broke through intraday support, so that was a 2.4% loss. In hindsight, probably more a gamble than a solid trade because I chased it.

I don't know why I am waiting so long to enter positions right now - it seems like I am always a bit behind. I think something psychologically is holding me back - maybe I don't want to put the gains I have had this far up to get taken away, and perhaps it's just the choppiness of August that is making me a little gun-shy. Today was a good example of that choppiness. Today though I think I left too many good lower-risk opportunities (if I acted upon them immediately) on the table. This is all hindsight of course, and the fact that these trades would have worked is the main reason I am frustrated. Today does, however, show the power of the 9 and 20 day moving averages as resistance points for bouncing shorts - many reversed right at those areas this morning.

Since the reversals on many stocks were so powerful today, I think we are kind of in a tough spot for starting new positions. The charts I see out there are UGLY, both as long and shorts if that makes sense. All these reversals and violent, huge swings in commodity and tech stocks make them tough to play on either side of the market. What I would like to see is for stocks from these two sectors settle down for a few days, form bear flags, and then fall lower. I have a little cushion in the two shorts I have right now and will use that cushion to see if they can fall further from here, but I also know where I will get out. I don't know if I will do much else. As for longs, I still don't see any that suit my style. Maybe they will start popping up in my scans, but I doubt it. Because of that, I still can't get bullish here. Bottom line is there is no reason to make big bets right now, but I will continue to focus on the short side only to see if any more opportunities arise. I'll put up some charts later if I find any. Best of luck.

Tags: SKF, MON, SOHU, BIDU, RIMM, ENER, WGOV, SINA, CREE

Well, it looks like I missed quite a lot Friday afternoon through today, as things look pretty crazy out there. Since I just got back from the weekend trip and there is still football to watch tonight, I am not going to post charts or do a video this weekend, but I will share some thoughts I have right now.

First of all, I did make a few trades on Friday in accordance to my plan discussed Thursday night. I thought the possibility existed that the financials were just biding their time before falling further, and if I saw them break, I would look to get short. I did short WB Friday morning at $15.51 and ended up getting stopped out later in the day at $16.12 for a 4% loss. My SKF position that looked great around 9:35 on Friday morning also did not last, as my stop was hit in the afternoon at $115.76 and I only had a 1.5% gain on that. Giving away almost 10 points on a trade is never fun, but I felt I had to do it, as the possibility of much higher upside existed from my perspective.

Obviously, the financials showed great strength on Friday. They did breakdown early, but bounced strongly. One of the skills a trader needs is to put his personal opinions aside when the market disagrees with them, and that's what I have to do here. I may not agree, but the financials acted very well Friday and will likely continue to do so in the near term because of the big news of the weekend, which I will discuss later. I am glad I used my stops on SKF because if I didn't, I could be looking at a major loss.

After going through my scans, I don't see much long or short. I said Thursday that the only thing I was looking to short were the financials because tech and commodities were extremely oversold and shorting them now would be stupid. Friday didn't change that - these sectors are beaten down and need to bounce before I would look to short. It did though take the financial part out of that equation - I am not looking to short these here. Not yet. So overall, shorting is not on the table for me probably until mid-week at the earliest. Unfortunately, there are no longs that interest me either. All I see is a bunch of ugly charts that could bounce, but playing bounces is not a strength of mine as I have mentioned many times on my blog. I am just not good at it, so therefore I am not looking to play any of these bounces. I will likely not being doing much of anything the next two or three days other than cover my existing shorts.

Why would I cover my shorts? (BIDU, CREE, MON) Well, the big news today is that our federal goverment, after stating clearly several weeks ago when the "first" housing bailout was proposed that a bailout of Fannie Mae and Freddie Mac probably won't ever have to happen, decided to bailout Fannie Mae and Freddie Mac. On this news, the futures are up big as of now (over 2%) and look poised to pop big next week. I have no clue why this is good news for the market - perhaps it will rid the market of a lot of the uncertainty that has gripped it the past year or so. Personally, I cannot think of any example economically where the government getting involved has helped things improve. I am not an expert however.

I do have to put my personal opinions aside as a trader. All I need to know is that the market looks like it likes this news, and with the market oversold and so many individual stocks being absolutely ravaged last week, this could be a perfect setup for market bulls in the short-term. Technically, the indices did put in some major bullish tails on Friday. The only problem is that volume was lower. If these tails occured closer to the July lows or in fact tested those lows, I would probably be more bullish here.

The problem with being bullish for me is that if you are a market bull here, you are probably sitting on some major losses anyway, so it is not like a week-long rally is going to give you big profits. More likely, a rally will take you to a break-even level, which is why I still feel a rally here will just be a great shorting opportunity. I could be completely wrong here, and maybe this is the bottom and everything will be up, up, up from here. However, the action in July was not the historical way a true bear-market bottom is formed, and the weak volume rally in August was not the historical way a new bull market starts. There was some MAJOR technical damage done to the market on Thursday, and I don't think that will be fixed overnight. Perhaps we have a big short-covering rally this week - remember that the biggest one or two day rallies always occur in bear markets - but there still a lot of people that are underwater here and will be looking to sell out if they can get some of their losses back.

My game plan as of now is to step back and let the bulls have their fun if they want for a few days early this week. I would not consider getting long many stocks unless the indices can get over and close above the following short-term resistance levels - Dow at 11,460/S&P 500 at 1270/Nasdaq at 2330. Now based on the futures, we might open right near these levels on the Dow and S&P, so that's why I said it should be an interesting week. But do you really want to buy and chase a huge gap open into overhead resistance in a bear market? Call me stupid, but I don't. Even if we get above those resistance levels, my scans are still not showing me any quality charts that are getting me excited. They continue to just not be there, and I think that is very important. So although I will try to remain open-minded, I am just not seeing much that tells me I should be a bull here.

What I will probably do is keep an eye on the tech and commodity areas, and if some of these stocks rally up to their short-term moving averages on lower volume, I will look to slowly get short these areas. If they get over those moving averages, I will get out. I think those are really the only two areas I would look at - I just don't have a feel for financials.

I don't know if any of this advice will help you - take it for what it's worth. Since I was gone Friday, this post is my way of organizing my thoughts, which is always hard for me when I miss the day's trading action. I feel lost when that happens. Bottom line is that because of how many people are short and because of how badly individual stocks were hit last week, the possibility of a major bounce here is high. That doesn't mean things are all clear for bulls. If this was the start of a major move, I would see much better charts in my scans. So far this year, I am doing pretty well and my mindset right now is that I don't want to risk losing a lot of my profits by making big bets at questionable times. Early this week I think will be a questionable time to do much of anything, so I probably won't. If you choose to trade here, best of luck.

Tags: Dow, S&P 500, Nasdaq, FNM, FRE, SKF, WB, MON, BIDU, CREE