Downtowntrader.com

Happy New Years to everyone! Here is a reprint of what I posted on blogger tonight.

2008 was an interesting year to say the least and while there were certainly plenty of opportunities it was also a very difficult environment at times. I ended up having my best year to date and one of the keys was acknowledging what the markets were telling me and altering my approach as an adjustment. For instance it was quite apparent early in the year that volatility was coming back and that it was important to account for that with my position sizing. Also, the second half of the year often saw daily gaps in the indexes of over 1% in either direction, and made for a difficult swing trading environment.

I didn’t change my setups for the most part, I just focused on using the ones that were still working. Also, towards the last quarter of the year, I dramatically shortened my holding periods to intraday only and small position overnight trades. Even the overnight trades were typically bought late in the afternoon and sold the next day. This allowed me to keep my exposure to a minimum and still be exposed to the increased volatility.

This year promises to be pretty interesting as well, as there is no doubt that the markets are not past the volatility and fear that has been prevalent. The markets kicked off the New Year with a bang on the opening day, and there is optimism that it will carry over. While I am neutral on the near term, the markets are starting to get overbought. While it doesn’t “feel” like the recent rally has been that strong, I was surprised to see that most of the indexes are up 20% from the November lows to Fridays close. Also, T2108 (Wordens Indicator measuring Stocks above their 40 day MA) is shockingly over 80%. This really caught me by surprise as it wasn’t that long ago (October) that I wrote about this indicator hitting the 1% level. Here is a chart showing T2108.

Notice how it rarely stays over 80% for long. While this isn’t necessarily a predictor for a market correction, it does provide a pretty reliable indication that the markets are getting a little unsustainable. What could and often does happen is that the markets continue to rise a little more on decreased participation until it eventually corrects. In this case, it could very well signal the resumption of the overall down trend.

This really is an interesting time, as there is conflicting evidence on the longer timeframes. While the markets have shown fear levels and other technical watermarks that have coincided with previous Bear market bottoms, there is also the threat (and evidence) that this Bear market has only just begun. While I won’t pretend to know what is ultimately coming, I feel quite certain that we will have at least one sharp pullback in the next month. We may rally into the Obama inauguration, or we may sell off tomorrow, but I don’t think that the fear that has been prevalent over the past year can be washed away with a one month rally. Maybe it can, but I won’t gamble with it which is why I trail my stops.

Good Luck and Trading in 2009,

Joey

Share This

I’m taking a break from blogging through the holidays. I will be twittering so you can follow in the sidebar if you’re interested. I hope everyone has a Happy and Safe Holiday Season.

Joey

Share This

I posted on automated trading on blogger last night. I think it’s worth the read if you’re interested in trading robots and automated trading in general.

Joey

Share This

Can TNA get back into the Channel, or follow through with a 100% fib retrace?

Not sure why the thumbnail looks like crap, but click on the image for full size.

To be continued.

Share This

Here is another article I wrote for Investopedia on stocks making 52 week highs, even while stuck in this terrible market.
Good Trading,

Joey

Share This

For those interested here is an article I wrote over the weekend regarding MACD divergences in some tech stocks for Investopedia.com.

I mentioned CSCO,IBM,RIMM and CRM.

Share This

As I was reviewing charts tonight, I was a little surprised to find many charts that looked good for possible long plays. While day trading opportunities have been plentiful, I haven’t really been compelled to put money to work in anything other then ETF’s overnight. While we are not out of the woods, I have to say, I am feeling more and more bullish. We could be in for a very powerful countertrend rally, and quite possibly, a real bottom. Futures are higher overnight again, and we could get a breakaway gap tomorrow. Let’s see if the bears can fade the gap.

Good Trading,

Joey

Share This

Sorry for not posting on this blog recently. Things have been really hectic for me and I just haven’t had enough time for blogging.

The markets are starting to get overbought on shorter timeframes, but it seems like the bears are covering into the election. I wouldn’t be surpised if we had another push higher before a reversal to test the bulls resolve. I do feel like we may of set a low already, and I would guess that the dips will be bought. Of course, I reserve the right to change my mind, but there are a lot of signs that an important low has been set, and in fact, maybe even THE low. The next few days may be tricky with the election coming up, but I am starting to see more charts that look decent for initiating swing trades. While I will miss the recent volatility for daytrading, it should usher in some decent swing trading opportunities soon.

Good Trading,

Joey

Share This

It looks like we may be getting small W bottoms on the indexes. Of course we are still trying to break out of a downtrend, and more then likely to a sideways trading range, the small W bottom could lead to tests of the declining 20 day sma’s. It doesn’t seem like much, but the indexes haven’t even come close to their 20 day smas in about a month. Tomorrow is options expiration day and I’m not sure what we have in store. I would think we run counter trend (higher), but who knows. With the spike in the VIX again today and the reversal off the lows, it is quite possible that we are stamping at least a short term low, and maybe more here. Without much to pick from in stock charts, I will stick with trading QLD for the most part. At least we are starting to see some reversal patterns off the lower bands in some stocks, which, while being high risk, are at least defined on daily charts. I’ve pretty much stuck with day trading, and hourly chart swing trading recently. But as volatility drops, we should have more opportunities to swing trade off daily charts.

Good Trading,

Joey

Share This

Friday was probably the most volatile day I’ve been involved in. The Dow was swinging around hundreds of points like it was nothing. The Ultra Shares ETF’s like QLD and QID have been great trading vehicles recently, moving more like individual momentum stocks then index trading vehicles. I still prefer to trade the ETF route right now in order to protect myself from adverse news overnight. While the ETF’s certainly gap, especially in this environment, at least I don’t have to worry about it disappearing overnight.

While it looks like we are gonna get a good bounce here, we don’t have an all clear either. Keep in mind that the overall trend is still lower and even if we did set a major low last week, it will still take a long time for a healthy base to form. I am still in awe at the wreckage in most stocks lately, and it will take a long time for the damage to heal. Trade carefully out there, we are still in a dangerous environment and who knows what mother market has in store for this week.

Good Trading,

Joey

Share This