The Daily Dose of Trading Comments

I've washed my hands with this market, this day, this month. In other words, I've simply taken the hit, and liquidated completely. The depression sometimes is too great and even though it is quite probably that higher prices are around the corner, I'm fighting the trend and taking a beating as a result. Thus, I'll start fresh in the month of May and try to get on the right side of this market. That may mean sitting on the sidelines for a while or something else. Right now, I'm in a funk and am clearing my slate in order to start over.

I'm finished writing for the afternoon as well. Let them whoosh it higher now that I'm gone. Likely ...

I've started liquidating with this break. Getting back to cash for the most part. Another failed trading day.

They are trying one more time to crack this market to the downside here with an hour to go. If they fail, the whoosh up could be fast. I'm nervous (as you would expect) buy holding still.

NASDAQ at the end of it's rope down 24 as it's almost on it's 200 day moving average. It will either rally from here or suffer a further and ugly move down.

Despite numerous short term positives, the market has been unable to appreciably lift. Each attempt has been weighed down by the relentless selling in the NASDAQ. That selling has continued to hold back the listed issues although they continue to show positive divergence. The key to the turn continues to be when and if the NASDAQ lifts and more interesting, when have enough chips been sold? Until then, the negative that is so thick will only get thicker and will make the bounce that much more forceful. So we wait ...

This NASDAQ continues to be a anchor on the market. It's making new lows as I type and I'm looking at stops again. Today is a mirror of the month ... difficult.

The pieces are falling into place here to catch a creeping rally ... one of those tentative stairstepping rallies that carries most of the day. Hopefully we can catch some of this move and capitalize on it to end this miserable month of trading.

Let's understand that this is simply a rally if it occurs and it occurs because a breakdown did not happen. How far it carries and how long is probably limited. There are lots of folks under water that will provide overhead resistance as we move higher so we will play it by ear.

They couldn't break it down, so now they start buying and getting some short covering as well. I added ASF just a bit ago and am trying to trade the SPYs and looking at the QQQs. It's a busy day and all is not pretty but we are doing our best to make some hay out of this volatility.

Closing in on key support areas. It will soon be do or die for these markets. I'm setting up stops to get out of the way if it breaks.

It's quite volatile early but the positive underpinnings you look for are there. All the data is on the table economically for the day and it doesn't look to kill this market today. This whippy trading is hard to deal with but you have to just work the charts now. I'm not adding and not subtracting for now. Going to give the positions a chance to move for us. Need a higher low here on the SPY.

Here's the fade in front of the last eco number. I've added the CHKP and just added the SPY back. NASDAQ going red as SMH bleeding red again. I'm done adding and now am in wait and see mode.

Good solid start. A little fade and I just missed picking my SPY back up. Next set of data points in a couple minutes. Added FMC and AME early. Bidding on CHKP but it's getting away from an entry point I can live with.

The first set of numbers are out and they didn't do any damage. In fact, we have seen a bit of an uptick as a result. Two more to go and the opening itself. I'd be surprised if we don't see some sort of fade off the opening and that will provide the chance to put some money to work. If we don't get it, then we ride the tide with what we have and look for intraday trades to the long side.

Yesterday's whipsaw caught more than a few napping. The date with the uptrend lines on many indexes were met as more than one saw the up trend lines tagged. The result should be a bounce. The duration is unknown but is likely to be reasonably short.

We took on long exposure as a result and will look to add to that exposure today if given the chance. Key area is SPX 1110. If that fails, all bets are off. On the NASDAQ, that 1940 number is the key area although it's more volatile.

I just took the SPY profits premarket and am looking to buy cheaper if the eco numbers cause a stutter step this morning. Personal income and spending in a few minutes and consumer sentiment and and Chicago PMI 15 and 30 minutes after the opening bell. Any and all could rock the boat. I look to trade from the long side today unless the key areas are violated in which case I will bail and may get short again. Don't expect that but you have to consider what you would/will do.

As the market falls, the plot thickens. Do we get the melt here or did we just see the extent of the damage? I just missed that second set of buys on the SPYs right before it shot towards the sky. When they turn it, they do it with velocity ... both ways ... as those programs kick in. The break of 113.26 did the same thing on the way down with a couple hours to go.

In answering the question above, my thinking is that we may have seen the extent of the damage short term. We put on some exposure on that thought ramping from almost nothing to about 35%. Earlier I alluded to day trading and capitulation moves as being good trades. That move down was a capitulation move it seems as we saw velocity pick up along with volume. That's two days of rather serious distribution on the indexes and that likely leads to a bounce. The indexes also met the downside objective and support levels on the channel. We may see a down open, but I would fade it should it occur.

So, another whippy day by the markets and we continue to ride this brute of a bronco. Hope you didn't catch a whiplash today and hope we all can profit by our actions today ... tomorrow.

Here's the list of buy candidates, most of which I'm purchasing now or just purchased. Nothing big but want a little exposure into the abyss.

GCI
SPY
BMET
TV
AIRN

Volume picking up and things starting to look a bit panicky. I'm searching through my list of buys to see where I might put a little of this cash to work on some swing trades into the panic.

Eventually this selling will exhaust itself but measuring that end is always difficult. Our retrenchment to the sidelines has been the safest play so far in the awful journey south again. Our day trades have failed us and we have made one small venture long for a swing trade in GCI but unless this market finds itself, that one could look like a day trade as well since our target stops will come into play before it even has a chance to do anything.

Support on the SPX is 1110 and we are almost there. Support on the NASDAQ looks to be around 1940 and that's just around the corner as well. I will look to take on some long exposure here somewhere as a result thinking tomorrow it won't look as bad as it does today.

The financials have been signalling all day that they are ready for a bounce and retail is offering a trend line bounce at this juncture. The big wildcard is the chips and I can't see what makes them bounce. Short covering at some point I suspect.

I was asked a few months back if I was turning into a day trader. My response was no, I didn't think so. Recently I've shared with you my attempts to trade on a daily basis and I must say, it's not easy. Yes, the TA principles still apply it appears from what I can see, but the difficulty is that there is noise in the stock market and with day trading you tend to react to the noise more (costing yourself bucks) than if you are swing trading. That leads me to this observation which I thought I should share. The best trading moves in day trading seem to be of two types.

1) The first is the capitulation/euphoria trade where the market moves up or down on faster and heavier volume. The trick is to jump in going against that trade at the apex of that move and then quickly dump 1/2 the trade on the bounce. The desire is that the retest succeeds and the other half you can hold for a move higher. Of course you could dump everything if desired.
2) The second is the trend trade where you lay back and wait for a trend to develop then you wait for a good TA setup to go with the trend. It usually is a wedge formation that you are looking for.

These two trade types seem to work pretty well. The difficulty is that you are dealing with a lot less margin of error and the expected returns are compressed as well. So this means that if you want to do this sort of trading, you have to do so in larger volumes. Also, you naturally do this in increments in and out for most trades just as we do on swing trading.

Just my observations.

As for today's market, this continued bleeding in the chips will keep a lid on any attempt to move higher it seems. It's such a large part of the NASDAQ that unless biotech is rallying, you just are going to have a hard time getting much lift without them. That's the story today and although I was observing it early, I didn't take it into account on that last attempt to day trade the indexes long. I guess that's one more observation. If you are going to try a trend trade, you need the key indexes in your favor. On the NASDAQ that's the BBH and the SMH/SOX. On the NYSE, that's primarily the RTH and the XLF/RKH.

The negativity is thick enough to cut with a knife. I'm 100% cash having gotten on the wrong side of this market trying to work a long trade today in the indexes. Ugh! We will get a real rally in here somewhere that we can short again, but unfortunately, today's early action fooled us out of some good shorts and now we sit empty handed. Unfortunately, I find it hard to consider chasing shorts at this moment as we now are spiraling towards support numbers that actually could provide ... gasp ... support for a bounce. The chips are the stinker at the party again. There refusal to lift has doomed all stocks again.

This relentless selling in the chips is amazing as there just isn't any lift there. That bleeding is affecting the rest of the market as is the news of renewed fighting/bombing in Iraq. I am maintaing a high cash position and am still working intraday long trades at the extremes. Staying agile and out of trouble. Still want to get short if we can get a decent rally again today or tomorrow.

Nothing but tricky isn't it. We get a little snap back rally that takes us to the day's highs and then we levitate for a while. I've just been dinking around with small day trades again as I continue to build my confidence in that area and my timing. I'm almost 100% cash at the moment as I wait for the next opportunity. It's been a tough road to hoe lately as these last two months have reaked havoc on more than one portfolio. I continue to believe that if we can stay about even, the opportunities will arrive and we will knock out some decent trades over time. That's when we make our next 10%. For now, we sit on the 10% we've made so far and be patient.

The trend today is likely up given what I see. That's the way I'm playing these day trades. I'd like to catch something around the low 112.9 area on the SPY, 36 on the QQQs for the next set of long attempts.

The missing ingredient on today's attempted rally is the chips. If they turn, then it could be forceful. I'm back to working intraday trades for now, unwilling to put on much exposure longer term. I want to incrementally short higher as today's turnaround suggests an oversold rally for now.

I'm seeing some strength I didn't expect to see in both the metals and in the financials. I've covered more of those shorts as a result. Just locking in more of the gains lest they disappear. These divergences could be signalling another attempt to rally this market on the listed issues.

After that little head fake to start the day higher, we have sold off fairly steadily. Short term you have to think that they SPY 112 area will be defended by the bulls and some sympathy buying could develop. Same thought for the 35.68 area on the QQQs.

Personally I missed my entry to reshort the SPY in the 112.80 area. So far now just observing. I did dump my last long in the portfolio right after the opening as it cracked it's recent lows. My, how hard has it been to be long the last few weeks.

Well, the GDP number comes in lower than expected so you would think they would rally the futures. Ugh ... lasted about 2 minutes. Turns out the number looks lower because the inflation component is higher which is ... ugh ... not so good as higher inflation is cause for concern of higher interest rates. Confused? Don't be. A lot of times these numbers simply provide excuses to do what you intended to do anyway and right now that looks like a bit more selling.

Yesterday I alluded to the small channel I had been using to trade of late. You can see in the graph below what I was talking about. That small channel looks to break down today and then the larger/longer channel takes over. Expect us to trade back towards the bottom of that channel next which takes the SPX to around 1110. If so, that's a lower low. Any bounce back up in front of the employment number next Friday is a good opportunity to short some more.

Futures looking lower to start the day. GDP and other eco news in a few minutes. I'll post after that.

ACe Talking.......cracked China:

I am out for the day, so a very brief, and very early comment pre-Euro opening. Asia being hit hard on fears over a slowdown in China. The news is that some major banks in China have halted lending until May 1st, and senior officials have been talking about using "forceful" measures to slow growth. I have warned you before that this China story will take hold, and it is certainly doing so now. Added to a slowing US Economy later this year, and you can see what we are going to be looking at in 2005/6. The markets are starting to get wind of that.

In my mind, I can see the pattern we will get on the coming decline. We will see a lower low than March at some time soon (ie, 1080ish SPX), followed by the customary bounce. However, the next time we turn lower, we won't be back till we hit that 950-965 level.
All the best.
ACe

Although the readers of these pages are quite kind, I occasionally get an email or two or (as it used to be) posts on the message boards suggesting that I don't know what I'm doing. It almost always happens when we are stuggling and that is what has happened lately. The desire to hit singles or home runs all the time is a misguided notion that occupies the heads of most novice traders. Heck, everyone wants to walk up to the plate and swing away with the knowledge that they will get a hit everytime to the plate, but if you believe that this happens ... even to the best traders, you are sadly mistaken. The difference at this site is we don't hide the fact that we aren't hitting home runs. We try to show you the realism that trading is. We do believe that most anyone can learn to trade if they have the desire, capital and patience it takes to do so, but it ain't all hits and home runs folks. Many times it's takes a good month or two or even longer to get a string of hits after nothing but outs. If you want nothing but sweet nothings about how to get hits every time you put money on the line, then you need to look elsewhere as you won't be finding that here.

Talking about hits, we did snap back and make a little contact today. This market was starting to struggle yesterday when it should have held and thus we turned on it and caught a little move. Looking at the charts after hours, we have closed under 2K NASDAQ and 1124 SPX. Both are negatives. Volume picked up as well and that's another negative. The market is quickly losing the steam and the chance it had to go higher. In fact, yesterday may have been the last gasp for this latest try. I'm not convinced that we strictly go lower here (I tried to buy some SPY at the close but missed my price range), but we aren't looking to good and if we get much more of a decline we will be setting up lower lows on the indexes and that's yet another negative.

In the morning we will get news that will likely move the markets prior to the opening. If the GDP is strong, we likely will sell down further. I don't think the employment claims will move things but the GDP number could. The small channel I was using had support at 1124 on the SPX. The large channel shows support around 1110. We will have to use these two numbers for our trading tomorrow.

With a half hour to go, the pressure continues to be applied. To profit, or shall we save survive in these markets, you have to be willing to take losses if a stock doesn't do as you expected and dump it without hanging around and hoping. We have had several of these of late where, all but a couple, have turned out to be the right move. Today's example is VLCCF. We dumped it early when it broke it's down trend line. It was down 60 cents or so at the time. Now it's down almost $3, over 15%. Whoosh!

Today the talk is about China. If I remember right ACe was talking about China last week. ACe, they keep stealing your script. Heck, if they want the news for tomorrow, all they have to do is ask us ... right?

Seriously, this is ugly and the question is what do you do into the close. The SPX is at the bottom end of it's channel as we head into the close and it doesn't look pretty. I'm looking to take a little long for a trade into tomorrow if we can buy at or near the bottom of today's range. Just a trade mind you. A bit scary as it always is but we won't take a big position in doing so. There's employment claims and GDP before the bell tomorrow and that seems to be a worry. If we can't catch a low ball entry, then we will simply stand pat.

This market is waving the white flag today. No evidence of any ability to move it higher. I'm going to look for one more shorting opportunity in the SPY with the thought of covering into the close. Just missed one jog up to 113.2 and I doubt I'll see that again so it will have to come a bit lower. Weak markets in front of uncertainty tend to close weaker. That, along with the technical action today, is the thought.

As we sludge through the slower lunch time trading, the market is holding the key short term technical areas. The real test will be this afternoon and as to whether we see strength or further weakness. All of this, mind you, has to do with the short term technical picture. We haven't breached the 1124 area yet and that's the last major milestone if this market is going to signal lower. Same with the NASDAQ. On the NASDAQ, the SMH feels as if it's finally tired of going lower and it may want to bounce at last. I may poke around in that area if it looks promising but given the current climate, you had better be careful doing so and pick your spots.

Today's action is damaging but not fatal to the bullish thesis of a new high still. Sure has hurt it though.

The support lies at 1124 on the SPX and that's where we are now. NASDAQ 2K as well. I'm looking for a bounce now off these support levels.

We got a break of that 1130 area and saw some faster selling as a result. I'm looking to short a push back to that break area now. We have broad weakness today on increased volume and although I'm not willing to count on follow through to the downside today, we certainly have the setup.

The SMH is starting to show some signs of life this morning. Yesterday we tried a couple names in that sector for a bounce. Is the bounce today? Will that lift these indexes or is it just a small short covering rally? Don't know. I do know that I'm working the boards short today and am ignoring any buy signals. It's getting too late to try the long side and my concentration is shifting short.

The SPYs keep weaving a falling wedge pattern intraday. I keep trying to work them for some small trades ... again just working on my short term day trading skills as we wait to see if the other shoe drops or not at this juncture.

I put the SPY shorts back on for a trade here. The bounce was rather feeble and volume is running heavier than lately on this selling. Using the gap area as our intraday resistance are to start with and looking for the SPYs to eventually trade back to the bottom of the multiday channel around 112.7 or so either today or tomorrow. I'm using the SPY as a trading vehicle and leaving the financial shorts in place in case we get a real break down. Again, the market has failed us with follow through for a while now. Not sure if today changes so am not making any big bets as a result.

So far that key 1130 area is holding. We should see a quick move down if it gives way this morning.

Well, this is uglier than I thought. To re-add the short now is to get short a bit lower than where we got out. Still waiting to see what kind of bounce we will get and with what kind of volume. We are losing the 1130 area again at that's key short term.

We have a gap down opening that's holding so far. I'm looking for a fade to take place here in a bit (run them up) and will look to reshort some SPYs on it.

Sometimes this market feels like a suckers game ... a game where you just can't win. This "It's up, no it's down, no it's up!" again sort of action is very hard to trade successfully. In fact, the more random it becomes, the less likely any of us will trade it successfully unless you have a game plan that allows you the luck of the draw.

So we get small, and we get fast, and we wait for key moments to deploy some capital. Getting small keeps us out of big losses while we wait for the opportunity to strike. It's not fun. It's not exciting. It's sound advice though and if you are to outperform, you must not perform negatively when the negative magnet is pulling on you and everyone else. That negative performance gravitational pull of late has been quite strong and the ability to keep from getting sucked in has been tough.

Yesterday we saw, yet again, a failure to follow through. The early push higher looked like a clean slam dunk of a break through the downtrend line. What we got instead was a head fake move that melted on late afternoon weakness. You can attach blame to this news event or that one, but the fact continues that there just isn't much follow through either way of late. That will change though.

I've continued to hold out for a last gasp type of run ... a run that would force you to buy. I've said before that time is running out and although there still remains time, I suspected it had to begin this week if it were going to happen. Well, it's hump day and if there ever was a do or die, today and possibly tomorrow looks to be it. This market is now moving to overbought and in a choppy market that implies something. It actually is one of the few things that have meaning because it results in a market that simply can't go much higher but is susceptible to losses. Not quite there but closing in. I've put out my initial short positions as a result and gotten even leaner on the long side of the equation.
If we are right, we chip away at some gains

I guess we shouldn't be surprised by what unfolded today. The trend of late has been for a failure regardless of whether we are heading down or up. That's exactly what we see again here today.

I did start to take a position however, as time is running out on the idea of this market to head to new highs. The failure today to take out downtrend line resistance caused me to take my initial short positions in the financials. I added a trading short on the SPY as well. This doesn't mean that we can't break this downtrend line yet, but my actions are suggesting that the odds of new highs are, in my mind, fading fast.

We saw increased volume today and ended up with mixed markets. We have larger economic numbers on Thursday and again on Friday and a Fed meeting next week. My positioning is a function of time and these events. See you tomorrow.

Since that last post, we have had intraday breakdowns in the stocks I've been trying to work. I added a bit more to the RKH short and have given up on doing anything long with the chips as that worked out to be a small overall loss for the day. Told you I wasn't that good at day trading :) They say you have to pay to learn. So be it.

This late day fade is not very encouraging if you want to be bullish. The market needs late day strength and follow through otherwise this will be seen as a failed trendline break attempt and will invite further selling. I'm not ready to declare that quite yet, but the last hour or so is fairly important if the hopes a further advance are to be realized. I'm starting to hedge and bet against it though ...

After a long stretch of ineffectiveness, you can actually reach the point where you feel as if you have to do something. The itch becomes to great, you pull the trigger with a larger than life sized position and you naturally get slammed. That scenario is what you have to guard against. The big loss that takes another couple months to overcome. Making money sometimes is about not losing much money.

The last week or so I've been dinking around with small day trades. I've kept them small partly because my confidence is not that high in this markets near term direction and partly because I'm not a very accomplished day trader. It's not an area of trading that I've spent a lot of time learning. So I've been taking this opportunity to learn and experiment in this area with small positions so as to not get hurt.

Trading a position during the day and closing it out before the market closes has some appeal if you can do it with any consistency. I'm not convinced that I have what it takes to do so, but in a market like that which we face currently, it has greater appeal since overnight exposure has been our worst enemy of late. Not saying this is the direction I will head, but adding small tools to your tool box is never a bad thing ... as long as you are careful not to hurt yourself.

The market looks to be gathering steam for another attempt to break higher before the bell. Internals have held up ok, volume is decent for an up day, and we don't see a large degradation in price as the day heads towards closure. I've been trying to work something in the chip sector (BRCM and INTC now) since the pressure there for one of those explosive short covering rallies looks to be just around the corner. Don't know that the move will happen nor if I'll catch it, but it provides an opportunity in a market where I don't care to hold large exposure ... especially overnight. So far I've met with no luck in this endeavor.

I would watch the close carefully today. A close at the high end of the range or at new highs will provided the ammunition for a further move. A failure into the close may doom the current attempt to break this downtrend line though and time is running out for the opportunity in my opinion.

I continue to walk a very tight rope not wanting to do anything of size in any direction. Took the small BRCM profits and looking to add it back on volatility. Did not venture into the SPY long as of yet as I missed the entry. Still looking. Starting a beginner short with the XLF as well but again, small to begin with so we can add later if needed. No need to push anything as of yet as the market is set up to break higher ... the question is "Can it?".

We are seeing increase volume on another up day although not the volume of last week. Seeing weakness still in the chips though and biotech slowing down. Internals still positive here though and there's still time to move higher so steady as we go.

We got quite a bump higher out of the news and we are now breaking through downtrend resistance. If the market can close strong today this break would leave only the triple tops as resistance and will likely enbolden the bullish crowd. I took out a token RKH short before the news broke and a BRCM long. Looking to add some SPY if it pulls back to the breakout area.

There's eco news at the half hour. Although I would lean long on any trades today, I'm still sitting on my hands for now. If we get a half-hearted knee-jerk down on that news, then I made make a trade or two.

As the sun comes up on these markets today, we see biotech hopping again and we must wonder if it's trying to tell us something. There clearly is the desire to chase if given much of a reason.

I've been unduly cautious of late as I wait for an opportunity rather than a crap shoot. The running thesis is that we will turn south at some point; eithe the current resistance levels, the triple tops from February, or from a higher point up around 1180-1190 on the SPX. I know that the herd will throw money at this market if it moves and I know there are plenty who view the current choppy trading as just a pause in the inevitable rise.

I feel differently in that the market is still struggling with recent problems and that more struggling is to come given the continued problems with the internals. Timing a top though is not so simple and I've get to even begin my attempt to do so. Two events will suggest when that occurs, a breakdown of a key level on one or more indexes and/or time. If this market is going to move through the current resistance level it needs to do so this week ... most likely today or tomorrow. So, as you see, time is of the essence now.

Another day of lackluster desire but the pullback came on lighter volume and after hours the indexes are back up again. I continue to tread lightly here thinking that we will get another push but unwilling to play that long in much overnight exposure. We will keep renting stocks by day instead. Have a good night and see you tomorrow.

ACe Talking...briefly

Just a quick note re short positions. I saw the figures for shorts on QQQ and Spiders (ie, those dominated by hedge funds) for the week ending April 15th. Short interest fell sharply from the previous month, with QQQ shorts down 24% and spiders -28%. My take on this would be that there is little energy left to lift the markets much higher, although the last time QQQ shorts was as low was in August 2003, after which the NDX rose 8%. However, the hot period (that's no pun, believe me) for investing has passed, and we are going to hit (sell in) May soon. If the market can only manage a 3% rise with big short-covering, then it's got less legs than you may think.
The sands of time...................
ACe

The pullback today doesn't break any key areas. It's been orderly. Surely it would had been better for the bullish corps had the resistance been taken out early and we built upon that strength today but that's not the way it has unfolded. The fact that despite the weakness in the chips, the indexes have held up ok as that weakness has been offset by the biotech strength. I continue to sit on my hands. I want a break up or down or the passage of more time before I do much of anything. Right here we have no resolution.

A very slow day today and I continue to tread quite carefully. When you trade a reasonably small portfolio, you can move rather quickly so there's no need in being the first in with all your money. You know I'm leaning towards a break higher here (through this downtrend line) to move us back to the underbelly of the previous highs on the listed issues. As a result, I'm not wanting to short just yet. At the same time, my confidence level in a move higher is so-so and thus I don't care to be very long. As a result, I'm pretty much in cash and am doing very little. The narrow range of the past two hours continues to hold and decreases the opportunity for trades.

The one area we are seeing volatility today is the serious speculation in biotechs as they have gapped higher and continue to hold. I'd like to play a name or two there, but my early attempt failed. May try again, may not. My focus is on the bigger picture and I want to catch the next big move there.

Sloppy and choppy trading continues. I've pretty much exited all positions at this juncture other than a few rented names. My confidence level is not exactly high. Tech is struggling on continued pressure in the chip sector. The biotech frenzy early faded a bit but is stil relatively strong. I've rented some QQQs long for a trade using the lows of the day as an exit point. I'm unwilling to allow anything too much room at this juncture. This week is a key week for the indexes and they are sitting at a critical juncture at these levels. Nudging up against resistance, still oversold but not nearly as badly as last week and with catalysts running out, the time is now if this market truly wants to make another run. I'm not pressing anything and remain mostly in cash.

Volume way off and little follow through anywhere and now in the major indexes as well. I tried to rent some space on NKTR early but that didn't follow through so we exited. Took a short in RKH again. May trade it, may build on it. Just depends on how the market trades here. We tried to break through the downtrend line early but failed. Now how far do we retrench?

Another day of insanity in the markets as we get random moves that defy reason. Two of my holdings are hammered out of the gate; one on a downgrade and one on no reason so far. I can't make sense of individual movements anymore it seems as it's pretty much helter skelter all around. It really is frustrating to see such randomness.

The general indexes however, are doing as expected with some buying taking place as a follow through to last weeks move. I suspect that will continue and gain steam as a result.

This weekend, in a Naked Trades article, I layed out the thesis once more on the potential for another push to and possibly beyond the February highs. It's critical to note the timing as the internals are becoming more narrow as we advance and the possibility of new highs continues to decrease with time. Nevertheless, we need to be careful to jump to the short side of the equation with this possibility hanging out there.

On the flip side, holding a large inventory of names has not proven to be justifiable either. If you pick the wrong name you are bludgeoned. So, for now it remains mostly cash, rental of a few names during the day on the long side, and shorting of indexes primarily at key points on the way up.

Unable to say much as I'm stretching to get out of here today. Taking a little weekend outing with the family. Note that the close today was bullish. After the last couple of days and the abrupt move back higher, today was just what the doctor ordered if you want to be bullish near term. Keeping with my thought of tempered bullishness short term, I worked a few issues long today but didn't hang around in too much. Closed those shorts early and will look to set them up again later when this oversold market is worked off. I'm thinking late next week or the following at the latest. See you next week. I'll try to put out a short article on ways to profit on this latest thesis if I can this weekend.

Well, well! Late day levitation is back as the indexes move to green. Internals still not so nice but it looks as if indeed they are more greedy than they are scared. Kind of figures doesn't it?

As I've said all along, a move to retest those previous highs still could be in the cards. Unfortunately we are not going to be able to take serious advantage of such an event should it occur, but we aren't getting hurt by it either. I'll look to put another Naked Trades piece out this weekend to outline this and how we might profit by it. I still think that with the risks as high as they are, if in fact that leg up comes about, you'd be crazy to put all your eggs in that shaky basket. At least that's my opinion.

The internals have improved throughout the day but even now with this push to green, they are still quite negative. Very select group that's rising today. Headliners again leading the pack. If you are going to play, you need to be able and willing to move relatively fast as the market plays rope-a-dope with the crowd.

We are seeing a slow creep higher as the day progresses. This weekend is the G7 conference, then next week more earnings, some eco news and towards the end of the week, I suspect the focus will return on the upcoming Fed meeting. Today I've mostly looked to buy a few issues on pullbacks getting long for the day thinking that we could creep higher and get some follow through on Monday. So far we haven't gotten much out of today but there is some improvement. The improvement is narrow though and whether it carries til the end of the day is quite debatable. Of course, all of this is small potatos as I'm not putting a lot of money into the pot. The trades are primarily in the gaming stocks, a medical play and now a shipping company. Again, just small stuff as we try to work our way out of a funk that this market has spread on us.

In case you are wondering, I've not forgotten the short side of the equation either and will look to add back there as prices permit. Careful as we go though.

This market is mired in knee deep muck ... kind of like all the snow I see outside my office window this morning. The weather is as confused as the market cause up here in the northern hemisphere, I would have thought it were Spring time.

Although the ability to follow through has been lacking for some time now, if the market doesn't simply give back everything from yesterday's romp, then I would expect Monday to see some additional buying. I'm not placing any big bets on that but am not betting against it either ... at least not at this level. Now that we have been teased with higher prices, I'd like to put the shorts out up yonder, not right here. So we wait on that count ... at least for now as the market sits below it's next resistance bar.

The breadth has deterioated through the early trading, but MSFT continues to act well as do the chips. I can't see us folding unless they knock one of those two legs off the table. So, it's a question of whether the rest of the market takes a look over it's shoulder and remembers that yesterday was a big volume move higher. I'm not expecting a breakdown here after yesterday to be quite frank about it. In fact, I'm looking the other way and thinking that we inch up as the day wears on. I would also note that the next leg higher, if it ever comes, will occur on decreasing participation in terms of breadth. That's the way these markets die off and exhaust themselves.

I'm looking at this market and even though it's red, it sure looks to want to move to green. I've covered my shorts once again and will look to put them back out higher. Added a little gaming stocks and AKS as well.

The financials are heavy again on interest rate fears while the NASDAQ charges on. Which tug of war wins? I'm being patient for the most part and waiting it out. Just dinking around.

The keys early are MSFT holding it's gains and the chips starting to chip in (pun intended). I'm keeping lots of cash here and playing very small as I chip away at this month's deficit. As I've said many times in many ways, you can't make money unless you got money so do your best when it's difficult to keep it close and dry. When you need it, it'll be there.

ACe Talking....back to 1993

Ok folks, I note the confusion out there. Checking back to my 1993 Nikkei chart, I note that it took 6 months for the market to roll over. It first hit 21,000 at the beginning of May, failed 3 times at that level, then fell to the 100-day moving average at 19,000 in June 1993. We then had a slow climb along this line till we hit 21,000 another 3 times in August and September 1993, before falling through the line and down 24% to just below 16,000 in late November.

Fast forward to today's S+P chart. We had the first test of the 100-day ma in mid-March, and held it again 2 days ago. We're still on for our summer party. Get the lotion ready.
ACe

It's Friday, the end of another week of somewhat insane trading. Last night was another one of those sleepless nights that sometimes occurs. You know the routine. You wake up for whatever reason be it your bladder, some noise, etc. You relieve yourself or decide the noise was nothing or whatever. You crawl back in bed and presto ... ten thousand thoughts dance about ... many questions without answers. So you lay with eyes closed letting all those thoughts ramble about knowing that it isn't going to happen. You are not going to get back to sleep. After an hour or so of trying, you simply get up and get on with the day albeit a long day indeed.

So I've poured through a number of charts today, a lot of them big picture charts reminded myself of where we are. I dutifully took notes and then finally wrote myself a big note. It says

"BE CAREFUL OF A BREAKDOWN OR BREAKOUT"

So what does this mean? I'll tell you what it means to me. I'm supicious that we are indeed in a topping pattern on the primary indexes. It's evidenced by choppy trading, expanding ranges, breakouts that fail, etc. Schizophrenic trading in a word.

Now if that's true, then it should be simple you say. Just short the thing and forget it. Well, if it were that simple ________! Go ahead, you fill in the blank here.

It's not that simple because the possibility exists (yesterday saw good breadth and good volume) that we finally get that breakout move that forces the masses to cover the shorts and all that cash that remains (however much it is) to come running in to buy more stock. You can clearly imagine what happens and how the headlines read if this were to occur. So, unless your pockets are deep and you can withstand such a move against you, shorting the top is not as simple as it sounds. You have to do it piecemeal and respect the datapoints that you see. For example, I've noted the following as short term confirmation that we likely retest the old highs. All of these numbers are needed on a closing basis. It won't take but one or two to do the trick.

SPY 115.50
QQQ 37.5
DIA 105.60

So if you choose to play for the stall and a subsequent move back down here, that's the resistance areas that should hold. Given the volume increase yesterday, the fact that we are still overbought (a bit less now of course), and the fact that tops typically see exhaustive runs at the end, I would definitely be careful with whatever you choose to do. I am.

Another crazy day of trading today as we gapped lower to begin and then pretty much trended higher all day. Now that eveyone and their mother has given up on a retest of the 1160 mark, maybe the market has decided it is time. Don't know the answer to that. Do know that we were oversold and due for some relief on that front as I had talked about for the last couple days. Whether this will be more than a relief of that oversold nature, we can't be sure. Odds on bet is that this is nothing more than that. Still, the market doesn't pay us always on odds on bet even though you have to play that way if you choose to play.

I, as you know, am playing it small and quiet cautiously. Now that we have reached farther than I expected, I've groped at the charts looking for the next point of resistance. It just so happens to be right here at the 1143 level on the SPX. On the NASDAQ it's here at the 2030 area and again at 2065 or so. On the DJIA it's right around the highs of the day at 10500. If these levels fall on a closing basis tomorrow, then I have to start thinking a retest of the old highs may finally be in the cards. After waiting for 2 weeks and giving up, that nagging test may in fact be back. As I said back then, and as it applies even more now, a retest and break through those levels will bring in the serious short covering and probably set us up for the best set of shorts in a while. Still don't know that it can happen and tomorrow will likely give us a good clue.

Regardless of whether any of this unfolds, for now, we have charged back to resistance in one fatal swoop. I've played some shorts as a result and will look to do so again tomorrow. Afterall, how many more surprises can this market hold for us little fools who attempt to play with it?

With this big push forward, the most striking exception is the chips. They are actually red as I type. There's the Internet, the biotech and others that are pushing us higher, but I submit that without the chips, the road north is going to be hard to follow.

There's not much pulling back today and I had to take small profits on that added short late today on the SPY. You'll notice that I have all these odd lots showing up in the portfolio today. IB has switched over to a new program that allows me to trade multiple accounts in true percentage odd lots rather than rounding up as was the case before. Although this may turn out to be better in the longer run for the money management of other accounts, it's probably going to take me a while to figure out how to use it properly. That's why you see all these odd lot trades.

Again, with half and hour to go, I don't expect much more pullback than we have already seen. Now that the SPX has regained 1140, can they make another move to test those old highs. Volume is good again today and breadth pretty positive, but I'm still unsure there's much more to come. I'm staying very liquid.

If you draw a downtrend line on the SPX, it comes in right around 1143 or so which is, of course, where this crazy market has traded up to with that last burst higher. Now that we have burst higher, is there reason to take it higher. Is there sufficient fire power to push right through this level? Although I didn't expect to see us push this higher today, I doubt we can simply keep going. I don't expect much of a fall though either. Instead, some profit taking should kick in and then we should see a push to close on the highs of the day. I've shorted the SPY again at these levels and will look for a quick trade then look to short it again into the close or, more likely, first thing tomorrow if it opens near the same levels. Since we can't hold positions longer than a day on most trades with any success it seems, we will continue to work this a day at a time and see where it goes.

Note that volume is good today as they have wiped out a lot of stops on this move.

Sometimes you just have to scratch your head. Exactly what is different today from yesterday? Did all the worries get left behind? What makes today worth 2% more than yesterday or the day before?

This thrashing stuff is not only frustrating, but costly because if you tend to buy things when they look good, before you know it, they look bad and you are holding the bag. When you are up one day, down the next and when the moves are this dramatic, it's pretty hard to get a feel for anything. That's the way I feel.

I shorted the SPYs on the way up thinking that there was no way they would make it to $113.8, much less higher; yet higher they have gone. Now I'm sitting in the red with a strong market and asking myself if, now that I gave up on that last binge forward, is it time? Is now the time that we challenge the old highs and ... gasp ... make new ones? It's this kind of second guessing that can kill your portfolio and is the primary reason I continue to maintain a high cash position. Until we get some direction instead of simply thrashing, I'll continue to play fast and leave little exposure on the table.

No sooner than I say it, they do it. The shorts were forced to cover that 1130 area and we spike right up to the next point on the graph. If you think trading isn't tricky, then you haven't been watching. This is thrashing action and the kind that can slice you up in no time. I've a reasonable size short position started and will trade around it if the market allows. If not, it's the beginning of a larger short that we will carry for a bit.

Market has pretty good breadth and is heading higher as we thought could happen. We are catching a bit of a ride but I put some SPY short out again. Just a starter as we move to resistance here. Looking to do the same in the RKH but not too quick.

As I said this morning, there's still the outside chance that this market makes new highs, but it's a lower probability than we previously had thought. I respect that possibility, but I'm not going to ride much long exposure for it. More likely, these resistance levels kill us before then.

Now with all my connectivity issues behind me, the first real look at the market shows the chip stocks weak and that's the early drag. Financials are steady and retail strong. We'll have to see how these chips play out as they are fairly oversold and at some point, you expect them to see some short covering. I've gone flat on the indexes and added a small long in AGY. Again, very tentative, but expecting it to trade choppy and will try to use that to make a few $.

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