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I wrote the following on blogger tonight.

My gut is telling the markets are in the process of capitulating. I was early on some of my buys and have thus been stopped out of several positions. I am still resisting any temptation to short as any snap back rally we get will occur sharply and trap more then a handful of bears. I’ve been continuing to nibble on the long side, but at this point, the best thing to do is what for the indexes to stabilize. Even after we get the first rally day, the markets will probably come back for a retest a few days later. It makes no sense to get too aggressive until things become more clear.

These can be difficult times for traders and the best advice I can give is to make sure you cut your losses with complete discipline. Just because the markets “should” bounce back, doesn’t mean they “will” bounce back before margin calls force you to sell. Your capital is the only ammo you have to compete in this world, and you need to save as much of it as possible so that you have a fighting chance when the odds are back in your favor.

Good Trading,

Joey

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The markets are at pretty oversold levels and could be setting up for a sharp snap back rally. While I could be early in positioning myself with more weight to the long side, I won’t be chasing any shorts until the markets work their way higher. I wrote about the t2108 indicator the other night and how it was near 20%, and Friday it registered at 14.81%. That is pretty low and if it wasn’t for the VIX not breaking to new highs, I would be uber bullish. The bulls should attempt to put in a bottom here which should be followed by a retest by the bears in the coming days. If the bulls hold their ground, then a quality rally should follow.

Good Trading,

Joey

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Stocks tanked today with the Dow undercutting it’s January lows. I wrote before how I was thinking things would turn bullish soon, but that we should get a capitulation move prior to that. Today could of been the beginning of a capitulation move. There are conflicting signals, as several indicators are at levels associated with bottoms, but others like the VIX have plenty of room. It’s tough to pin point exact turning points in the markets, but at times like this I tend to lighten up and wait for more signals to align themselves. While there really could be some nastiness up ahead the next few days, I am starting to think more bullishly, and prefer to start building a buy list rather then add to my short positions. We’ll see how the next few days shape up.

Good Trading,

Joey

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It seems like there was an interesting finish to last week in the markets. I left for a New Orleans vacation with 7 positions and came back to find only 2 remaining. Luckily, 3 of the 5 exits were on stocks reaching their targets so the net was easily in the positive. I spent today trying to get back in synch with the markets and it sure looked like today was just a narrow consolidation to be followed by further weakness. I am starting to think there are two possible scenarios unfolding, which should determine the next tradeable move. The more likely of the two is a quick panic move lower, which would cement an intermediate term bottom again, and set the stage for an election / olympic  rally. The second, is a news induced rally soon, that would prevent the markets from becoming oversold enough for that bottom, followed by a spectacular short selling opportunity.  I wrote about Worden’s Telechart T2108 indicator and why I think it’s close to signaling a reversal soon on blogger, so go check it out.

Good Trading,

Joey

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I will be out the rest of the week on vacation. I will be heading out to New Orleans for a few days of fun. If anyone has some good suggestions for places to eat at or visit, please feel free to drop a comment.

As for the markets, I was hoping to get a decent rally tomorrow to allow for some re-entries into some shorts or inverse ETF’s. While we could have more strength ahead, I am still leaning towards the markets being lower over the next couple of weeks.

Good Trading,

Joey

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Happy Fathers Day to all the Dads out there.

Joey

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I posted the below on blogger today.

I’m not too crazy about chasing any new shorts right now. Although I think there is a good chance we continue to see downside, we are starting to get oversold and a snap back rally will probably happen very quickly when it does. I was surprised to see that the percentage of stocks over their 40 day moving averages dropped to 27% the past few sessions. I usually look at levels under 20% as oversold and it could easily get there after a day or two of extended weakness. Therefore I am also not looking to go long in too much now either. I would rather wait to get to an extreme oversold environment, or wait for a small bounce to relieve some of the fear in the marketplace. What I am doing now, is making a list of stocks to watch depending on the next few days of action. If we gap higher tomorrow on economic news and it sticks, I will then be looking to re-short next week. If we gap lower and crash, then I will start looking for long plays next week once things settle down.

Some stocks that have been showing relative strength are:
Some specialty retail like TRLG and DLTR
AUXL
Several Junior Oils like PDO,FPP,etc.
RIMM
ag stocks like MON and MOS
More oil stocks like GMXR and SFY

Stocks that have been showing relative weakness are:
Any airline stock
Any financial stock
China and Financial ETF’s
Non specialty retail like M and SHLD
Some oil like RIG and XOM

All of these are on my watchlist and could provide decent entries over the next few days.

Good Trading,

Joey

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I mentioned last week how downtowntrader.com readers could get a 16% discount for the Tradecision software.  Alyuda Research just introduced 2 and 4 month subscription packages for those that don’t want to commit that much capital to buying a software package. Additionally, they are running a promo where they are offering the Alyuda Neatscan Market Scanner as a bonus to all buyers and subscribers. Keep in mind that there is a 30 day unconditional money back guarantee on their software, so it may not be a bad idea to pick it up now while the Neatscan scanner is free. You can find more information on the Tradecision software along with pricing here.

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I wrote last week that I expected a possible bounce, but an eventual move lower to test the April lows. While I didn’t expect both to happen on consecutive days, it appears that Fridays move lower is the beginning of a sharp move lower.

Fridays quick reversal of Thursdays strength is a reminder that the markets are in an assumed primary bear market. This is my opinion of course, as you never know what market you are in until it’s in the rear view mirror. You do your best assign probabilities and then manage your risk.

I am still working with the assumption that we are headed lower, and will looking to add to short positions on bounces to declining moving average resistance.  I still think there is a chance the bulls step up, as the Nasdaq and Russell are still clinging to support, so iIf something happens in the next few days to change my mind, then I will simply switch sides. That is the beauty of short term trading. There is no need to marry yourself to a position or conviction. With commissions as cheap as they are it doesn’t make sense to hold on to a position when the markets go against you (not that high commisions are an excuse to do otherwise).

There is a good chance we are going to see a sharp increase in volatility, so trade carefully out there.

Good Trading,

Joey

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I mentioned last week that I felt the markets were headed for a retest of the April lows, and possibly the March lows, but that we may get a bounce for the week. We did in fact get that bounce, and promptly reversed at the beginning of this week. It still looks like the markets will continue to pull back here, but the bulls are not making it that easy. The bears have had a couple of chances to press the action and haven’t really delivered any knock out blows. It’s quite possible that the market gets another bounce higher here, although I am still leaning towards upcoming weakness in both my opinion and portfolio. The next few days will be critical, as any substantial move lower will probably trigger some panic into the markets.

Good Trading,

Joey

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