The Daily Dose of Trading Comments

As I look at the charts this morning, the clear support resistance zones on the SPX are 1120-1130 resistance, 1100 support. That's the current range. On the NASDAQ, 2K is immediate resistance up to 2020 and 1925 or so is support. I'm looking for an imminent pullback but expect to make some short term purchases into that move. May lift a little short and add some longs. If we get an unexpected rise first, I'll look to short a bit more into the rise. With the jobs number this Friday, an overbought market and continue geopolitical concerns, a pullback looks to be overdue. Unless we get some unwelcome/unexpected news that raises oil prices and bonds then it's likely the pullback gets bought this time around as there's a decent base now below the market that should provide buying support.

The scenario that looks to unfold is a pullback (watch volume on the pullback to see if it expands or not) and then another attempt to push forward off the support levels. The next push up will define whether the downtrending channels can be broken or not and change the intermediate term trend.

Today was the drift day as we expected with little opportunity to do much if you are a day trader as the ranges were quite narrow for the most part. I worked through a lot of charts and am doing that Cool Hand Luke thing ... "Get your mind straight, Luke!".

Next week we come in to find an overbought market heading into a Friday employment number. Those numbers have given fits to the market of late. I would expect some selling before the number out of respect to the number, the overbought condition and the resistance ahead. That's the way it looks from here.

To all of you out there, have a safe and happy weekend. See you on Tuesday.

Today is a day of working through many many charts. I'm looking for low risk entry positions on a pullback and have found a number of candidates. How much we put on and in what issues is a function of what the market does. That market looks to be setting up for a pullback here near term and then probably at least one more lurch forward before end of month. If it plays out that way, then we can remove a little of the shorts on the pullback and add a few longs in tandem. All we can do is put our best take on what's next and see if we can actually carry out the plans given the result. Of late we have failed in that as our prognosis has been reasonably accurate but our execution less than useful.

It's a very slow day today and I'm pretty much off doing other things with some orders hanging out there to buy a few things. Just checked to see that we had purchased a couple names of which we mentioned earlier. I don't expect much of anything to transpire today in the markets.

I've looked back again at what we have done wrong and right over the past couple months. Mostly there's been a lot of wrongs and a few rights. Keeping our losses low is the biggest right as we are in a position to capitalize if we can catch the next move. Wrongs lately have mostly been impatience. It's easy to talk about, hard to do. If you watch the markets closely you many times find yourself getting to close and protecting too closely. Of course this is what allows us to keep from getting our heads handed to us in losses, but there have been a number of positions especially of late where the position showed no wrong yet we exited. Those exits have, for the most part, been costly in terms of potential profits. You can go down the list of recently closed positions and see what I mean.

Also looking back, we have a market that is showing that renewed optimism, the kind that get's you thinking that all is ok. I'm rather skeptical and have a hard time changing my view. I remember a little over a month ago talking about how a push to new highs would suck in the new money and then a real bull trap could be sprung. It turned out that we never got the new highs, we didn't get short soon enough and we missed most of the mess that entailed on the down side. While we didn't lose into the abyss, we didn't profit by it either.

Now we sit with another run in front of us. The easy look is that there is a resistance play right in front of us, but will that be the end of this march north, or will that simply be a pause before another pounce. If another pounce, that would uncover some serious short covering as the trend short is just over head. If that breaks, then new money and old short money will likely scramble to buy and that gives us another push right back towards the old highs. Don't know that it will happen, but the table is set. Of course, to get it going, the short of the current resistance that itself fails to push to new lows could be the fuel to get the run going. Just thinking out loud.

What if we go the other direction and say the current down trend holds and that this resistance level does prove fatal to the bulls? What then? In that case, we should make lower lows in the near term. That's a hard short though if you catch a euphoria up day next week to put on the short, then you have enough cushion to see how the table gets set and to decide to cut the shorts loose (either all or partial).

The mistake I keep making and that works in either of the above scenarios is to buy some good companies and to hedge them rather than to make and all or nothing bet. GD for exmaple is showing a good trendline break. We should look to accumulate some of that and hold it for a while. If things start looking iffy, we shouldn't just dump it and run, but either hold are add a bit more. We can offset such action with a short on SPY if we want at a given ratio. That way we are keeping a good chart in our portfolio while being able to cushion the wait if we drift lower. Good charts should hold up better than the average chart for the most part. They should also run faster and higher when they are running.

This is the major mistake I've made of late. Time to incrementally change our trading behavior a bit.

Kind of a late start today as I got up middle of the night and worked through charts only to fall asleep later. The market is due for some sort of pause or pullback probably next week. Whether we see a signficant retrace of this move off the lows or not is questionable. Many times, when they catch enough folks wrong-footed, then they continue to pressure that group. I believe that has likely happened to others beside our set of shorts.

The pullback would be an opportunity to lift a little in the short department to put back out later and to add some longs at lower risk entry levels. There are a couple that caught my eye last night. NOOF is one as they just reported. Two down and out type plays look like OMNI and SKIL. ASF just reported and jumped. SKIL reports next week and looks situated to do the same.

I don't see a lot happening today in front of the long weekend. Expect a drift lower.

Not much of a wrap up here late today. Market did put on late day strength again and that bothers me short term in that the market keeps signaling it's intention to climb a bit more before pulling back. I did release some of the short positions today thinking that we try to put them back in place early next week. Time will tell if that's the correct strategy. Note, there likely will be the opportunity to get long when we do pullback. It will also likely offer lower risk setups. Something to think about and prepare for.

Market keeps stairstepping lower in front of the long weekend as the early buying evaporates. I'm slowly looking to reduce my exposure with the thinking that tomorrow will offer little in the way of trading and that if nothing terrible happens this weekend, we could see another rally come Tuesday. We will keep some short exposure on the table as well, but will look at the market next week attempting to test or best the highs put in this morning as a natural place to put on a larger bet for the short setup.

I took down some GD this morning long on a trend line break but just lifted it at even. With the weakness today and the expected weakness tomorrow, I'd like to put that trade back on sometime tomorrow. One of the few long ideas I have at these levels.

Well, there was a quick break taking away about half the gains in the major indexes and pushing the IWM negative. I've traded in and out of that issue making small gains and continue to trade it today.

While ACe discounts volume in his earlier comments, I can't go that direction. Volume has always played a big part in my analysis of the markets. Volume doesn't always give a complete picture but it is definitely a part of the picture in my book. Speaking of volume, we saw good volume early as a lot of positioning in front of the weekend was happening. Today is the last day to have sufficient volume to do that in a big way. I'm looking to reduce exposure a bit into the weakness today along the lines of the earlier post.

With the markets approaching key levels of resistance here after a significant fast paced advance and with a long weekend looming, just seems that they will take a pause in front of all that doesn't it. If nothing happens over the weekend, I would expect another kind of short term blowoff advance on Tuesday of next week setting up the next pullback. That's the best forecast situation I can see.

I'm looking to try and counter trade this big advance here at these critical levels this morning for a quick day or two trade.

So far the gap opening is holding and if it holds for the second fade my take is they push even higher today and try to give confirmation to Tuesday's bounce. Early looks is quite positive for the market again. I feel like I'm being run over by a freight train.

ACe Talking: Bull charts:

With the European markets turning bullish on the short-term indicators, there would appear to be some wind in the sails. Unfortunately, we now have the first 5-day gain in the SPX for 8 months, the last being October 1-5 2003. That little rally was significant, as it was the last time we saw 1,000 on that index. Could this little rally be equally significant? You are left with a choice here. You either get those shorts on very soon, or buy the dip (note that we paused for a week after that last 5-day gain). With the long weekend upon us, I will not be relying on Friday to remove some longs, so will use this early strength to pick off some little cherries. I believe there will be another opportunity to buy this market at lower levels, although maybe not that much lower. My chosen course is to play the upside here, and look for that downtrend to break. Note that Cisco (CSCO) has already led us through its 2004 downtrend, and I will be looking for other charts that have done the same. In Europe, ST Micro has also broken the downtrend. Be wary of this widening out.
ACe

Today should see follow through action from Tuesday if Tuesday is to have legs. Early futures indicate it could happen. I see a market that is indecisive and betting both ways. One side is wrong and the move out of this indecision is likely to set the trend again for the next month or two. Could take another 2 or 3 weeks to set the stage though.

In between, it's most likely back and forth. One side gets the upper hand for a bit then the other. Right now the bulls seems to have the reins but I doubt it be too long before the bears grab them back. We will reach a short term overbought market within the next two or three days. Unfortunately I've been trapped in some shorts I put out too early and am waiting to add to them or pull them on a set back. The pain of trading sometimes is a head game and now I have many games running inside my head.

ACe Talking: Turn off the volume:

I am currently having another one of those wrestling matches, where one half of me wants to go back into auto-pilot, and stick on a few shorts after the recent bounce, but the other half suspects something more to come. I get this feeling that the bull part may win out, as the clues I am finding tell me that there is more to this little move than just a set-up for some easy shorts. Life is not that simple.

I hear too often about the lack of volume. Taking this as a reason to do (or not to do) anything is very wrong. This mistake belongs to those that have not lived or traded through a real bear market. I sat there, in a very noisy office, in September 1989, watching traders jumping up and down chasing after Japanese shares and warrants, and this was in London, after the Tokyo market was shut! Volumes on the Tokyo Stock Exchange were averaging around 2 billion shares a day at the time, and it felt like that was the average outside market hours too. Whizz forward 3 years and there I am still in the same seat, but a very different market. Sure, we got a 40% move, but daily volumes on the TSE were averaging 300 million. Not convincing? A reason to do nothing or be skeptical? Sure, over the long-term, that was the right attitude, but it didn't stop many a 20% rally along the way. Don't make the same mistake. Volume comparisons are meaningless. Look elsewhere for clues as to your next move.

So what is the next move. As I stated at the beginning, I smell a rat here. We are being set-up for an easy short as the downtrend lines come into view at 1125 ish SPX. But I look at those hyper-growth stocks in net-land making new highs (EBAY, YHOO, RIMM), and I see and hear too much negative complacency (the easy shorts lining up). I have never wanted to side with the crowd, and those very negative readings I mentioned a week or two ago (put-call ratio, bull-bear ratio, ISEE, breadth indicators, McClellan's Oscillator, RSI readings...)are still in my mind. Have we seen the lows of the year? Part of me is beginning to believe we have. Scary thought.
ACe

Markets held all day. Volume so-so again but we are basing after a big rise which is usually bullish short term. Not what I would like to hear. I'm still looking to either trade around my short positions or average into more but am waiting for the appropriate time. Timing becomes critical now as we missed the first attempt.

Other than a hiccup on the terrorism news conference, the markets have steadily worked their way higher today. Late day strength is not what I'm looking/hoping for but that is a distinct possibility given the action. The breadth continues to broaden and suggests a further climb into the close. These last two days have sapped the cushion of profits that we had taken all month to build in the public portfolio. What a pain. You make a mistake, a misread, a swing with no contact and you are left eating the dust.

Breadth has continued to improve today but volume is still so-so. The problem we face here is after a big up day in a down trending market, do you chase? That's a risky strategy but as we have seen, this market can get a whoosh up in a downtrending market just like it can get a whoosh down in and up trending market. In an uptrending market, the whoosh down is an opportunity to add to long positions. In a downtrending market, the whoosh up is an opportunity to add to short positions. The key is timing the add in either case. So far I've not added and the strength in the financials keeps knawing at me as that is where I've overweighted in terms of the shorts.

The psychology that occurs when the market moves against you is always interesting. You begin to question your every move. This occurs more intensely after a long term of underperformance or even relative underperformance. That's what I'm battling with right now. Even though we have to be realistic about our performance and that we have indeed outperformed with respect to the market, we have not outperformed with respect to our goals of 30 to 40% per year return. Of course these moves come in bunches and those numbers are still quite attainable, each day that ticks off makes you question yourself even more.

When this happens, I try to remain optimistic and try to keep my portfolio from getting serious drawdowns. If you have a process that has worked for you and provided good gains over time in both up and down markets, then it's not a time to change what you do. It's time to work a little harder and finding good trades and to keep on doing what you do. Eventually it's starts working again. It's a game of probabilities and there will be stretches that test you.

We just witnessed the push for new highs on the days. I'm expecting another push here in the next 15 minutes or so that will define whether the day is likely up or down until end of day. A failure of new highs will mark some distribution most likely.

I've been very quite unwinding some more longs and being stopped out of the SPY short. Still being quite cautious to do anything here. Intermediate trend is still down but short term the bulls are feeling it from yesterday's move. The question is do they want to buy more and chase or not. So far it looks like not.

So far it's an orderly pullback and that's more bullish than bearish. I would look for spikes on pullbacks but am not expecting them to hold until later in the day if then.

ACe Talking: Watch out for a terror-ble summer!

Summer is here, and will be marked by our bank holiday on Monday, and your day of rest too. With the onset of summer, it's time to start thinking about what form the promised act of terrorism will take. Today, we have a report quoting U.S. sources saying that an Al Qaeda cell is now active within America, and will strike over the summer using chemical or bio weapons. Not a happy topic of conversation over your BBQ this long weekend, but you need to be aware. At some stage, they will raise the alert reading to red. Not sure if that will be before or after a strike, but either way, I wouldn't want to hang around waiting for it. Hopefully, we get short this week, and I am not sure that Friday will be the day, as there may be few buyers over a long weekend, with a day's added risk.

The charts tell me that we don't turn back right now, but need to push that 2k Naz and 1125 SPX and 10200+ Dow, but whether we can touch that today or tomorrow is another matter, and therein lies the problem. Having cashed in most of the profits, awaiting some mugs to jump on the short trade to enable me to buy nearer 1100, what happens if we don't see 1120+ today or tomorrow? Problems, problems.

The durable goods orders give another boost to bonds, which I intend to run much further. The market has got way out of line with reality on interest rates, and when the concensus swings back, bonds will fly. The current rebound will support financials, and the market in general. I am hoping this gives us that 1120-30 shorting opportunity. Whether I take it or not will have to be seen. Many hours thinking ahead. Back Later.
ACe

There are times when you get half the picture correct and it just doesn't matter. We started gaming for a traded north late last week and stated that the market has this week to get it done. Well, not only did it get it done, it got it done in a big way. Unfortunately for our portfolio, we had too little and took it too early. Now we are hanging short after a move that kind of takes your breadth away. Is this the start of something larger? Could be but the market has a lot to prove for that to be.

On a short term basis, I would expect some sort of backing and filling. We put a couple more shorts on right at the bell yesterday and we need to work some trades on pullbacks to reduce short exposure short term and to improve our basis. We also may look to add a few select longs on pullbacks as well. This all assumes that the market continues to act well on pullbacks. Volume continues to be a key in my book. Although it increased yesterday, it was still below average and a lot of that was likely short covering.

We have a long holiday weekend in front of us, the continue geopolitical fears should manifest themselves as a result. Oil not backing down yet and mixed eco data that came out a bit ago. Likely to be choppy the next few days. If the market can hold though without giving back the majority of these gains and the weekend proves to be relatively quite, then next week could see a renewed attempt to push further north. That's the backdrop.

Bleeding might be an apt description of my condition as opposed to ACe as I let the longs go a bit too soon given the push into the last couple hours. As I look at the closing numbers we see the 1960ish NASDAQ and the 1110 SPX have been met. Is it pullback time or a forward charge now?

Volume did expand today over the recent levels which were moribund but even with the squeeze they really have just brought the volume back up to the average volume of the past twenty days. That's true of both the NYSE and Nasdaq issues. So tomorrow will give us some clue as to how real this rally is and how far it shall travel.

I ended up shorting some RKH and SPY at the end of the day. I've removed the majority of long positions and booked small gains. I had a bad day considering the gains that were seen today on the indexes as our portfolio lost value given our short bias. Didn't move early enough to take off the shorts and didn't want to take them off late. So it goes. The channels suggest SPX 1130 and NASDAQ 2020. You may see me trade in and out of these shorts in the coming sessions if the strength persists as we jockey for the next turn down. Good night.

ACe Talking: Briefly..

No late day swoon in evidence, and the recent comments from Cisco, and the news earlier from the Semiconductor industry may ensure it doesn't arrive today. Being a skeptic, I am not as long as I should be, given recent comments, but at least I am not bleeding. I can see a test of that downtrend which I see at 2030 ish on the Nasdaq, 1130 SPX. When we get there, I'll tell you where to stick your fingers. I am overdosing on positive charts right now, and it really doesn't give me much pleasure. Try looking at the low priced crap which has just turned "buy" on my radar, like JDSU, LSI or SUNW. Alternatively, go lie in a dark room. See you there.
ACe

I, contrary to ACe have actually been backing away from this advance today lifting long positions and waiting on shorting opportunities. There are a lot of tough resistance points ahead of this market and until we see a few days of serious buying interest not just short covering then the jury is still out in my mind. The trend is still down and until that changes if you plan to play a counter trend trade I would suggest you keep your fingers close to the buttons and your time frames short. If I read ACe right, I believe he's saying the same thing.

A couple hours to go and we will see an interesting finish today. Volume has picked up and whether we see continued buying into the close or not is a big question. Momentum certainly is in the bulls favor right now but we are starting to inch closer to more serious resistance points. More interesting in my mind will be what kind of follow through we see the remainder of the week. Will volume continue to increase as does price. If not, this is just another low volume bounce that is destined to fail.

ACe Talking: Go with the flow (of oil):

A quick hello from me. Hello. This market is now tied to the oil price. If oil gets squeezed higher, the market will drift sideways to lower. If we get a dip in the oil price, then we can get that 2-3% move. As oil dipped earlier, my little finger went a walking, and we now sit pretty. It sits here waiting to walk back out, but the charts keep telling me to stick my finger somewhere where it won't do much walking out.

I am very excited (short-term) on some quite important charts, which have shown a buy signal on the MACD I follow. Could be good for 3-4 weeks at least. The ones I like are: IBM, INTC, LSI, JDSU, SUNW, C, JPM, HPQ, AXP, ONE, LOW, WMT, AA, AL, X (all stocks) and indices like NDX and now SPX, DWC (the Willshire-new code) and more. Too many major charts saying "come play with me for a week or 4". You don't turn down that invite (at my age). And don't forget bonds. I saw the turn there a week or two back, and remember that this was a drag on the markets.

I'm off, with several things crossed whilst I am out. Good luck, and remember to look all ways before crossing this road (markets). The clues are out there.
ACe

The market has held those early gains rather than giving them back as I expected. I've been slowly parcelling out long positions and will be looking to add some more short positions as we move up. I have no faith that this move higher will grow legs and run. I'm quite skeptical of the ability to move appreciable higher. We will be overbought by the end of the week. There is room to move a bit more from here such as 1110 on the SPX, 10200 on the DJIA or 1960 or so on the NASDAQ. I'm still looking for a 3rd leg down on these markets, a leg that makes most forget that they want to be long. That type of a move lower would set up a nice buying opportunity. I don't know if we will get it, I am reasonably confident that we will not move appreciably higher from these current levels without some backing and filling. That stuttering move should offer the opportunity to leave these short positions if we feel a bottom is in. Just playing the odds as I see them.

There was a bit of burst up in volume in that last half hour and it was probably short covering as the indexes shot up. It's likely we will see a fade of that move higher as the day progresses as well as a fade in volume. Again, this is not the time or place to make big bets. Time is running out on the upside on a short term trading basis and the short setups are not quite as appealing just yet. If you have nothing on short now, then yes, maybe it's a good spot to pick. If you already have shorts in place, then another day or two to add to them is my thinking.

The market has began to find it's footing today. I ended up taking some quick small profits on most of the financial shorts and added back CYBE and some CBT on a breakout. Again, just dabbling with small plays as we await a bigger picture move.

There is a dearth of volume this morning and now that the eco numbers are out we look to trade lower. Financials are weak as is most underlying indexes. I see oil, drugs, precious metals, and real estate trading higher and that's about it.

I've done nothing and continue to monitor. We are running out of time for an upside move. I believe it has to happen this week at the latest to have a chance to get some momentum.

Futures down a bit before the opening today. The President's speech really didn't do anything for the market. Weakness overseas looks to be weighing on the market early.

Yesterday we saw a continuation of light volume and no follow through. I reduced holdings a bit on the long side as a result and added a bit more on the short side. Still working both sides but it continues to be the case of very rough sledding if you are trying to head north. At some points the trades will work in that direction again, but until then keep the percentages small and keep your time frames small as well. You don't want to start the next race from behind.

Although I believe there's a decent chance of a bounce in here somewhere this week, I'm skeptical. My focus is on booking small gains still on either side of the table. Unfortunately this may mean that we miss a big mover but it also keeps us from eating a big mover the wrong way. Until we get another good short setup up or until this market gives us a different trend that's all we can do.

The small cap stocks outperformed again today and that is a sign of more speculative buying. The problem is that the volume is nonexistent and as such we can't have any confidence that the move will continue. It just feels like we are knee deep in mud and can't really move. I'm sure there will be something that comes along to shake up this market and that we will get a move one way or the other in the coming days, but for now, it slow and uneasy trading with no real direction. As has been the case for a long time, trying to catch a ride north is a heck of a thumbing exercise. Just when you think you may have caught a ride the market pulls the rug out from under you.

That's it for today. I'll be back tomorrow and we will see what stirs. There's the President's speech tonight and some confidence numbers tomorrow. If you are looking for a catalyst, I'm not sure what it would be right here. Oil refused to come in despite talk of increased production. Interest rates increases continue to hover in the back and the multiples on stocks just keep coming down. Above all, there is a lack of bidders for stock and without buyers driving prices higher on enthusiasm I can't see how we push north from here. Good night.

If you are looking for positives from the bullish perspective, you would have to note that stocks have held gains today ... that the breadth continues to be positive ... that ... ugh ... can't see much else.

The real story to me is that there is no volume. There is no commitment by participants to put the money up and take down stocks at these prices. As long as that legarthic action continues, I can't get too excited about putting my money on the line on the long side.

After the early bookings of profits, I've been pretty inactive. Did put on a little more RKH short for a trade over the next couple days and that's about it.

Although I would like to be doing otherwise, this market is not offering sufficient opportunities to get aggressive on either side. So, I'm stuck nibbling long on stocks that have good charts but have been sold down today. HURC and CYBE are two that I just did that on. Just trying to make a few pennies here but again staying very cautious and small.

I wish it were as simple as buy and forget or sell and walk away but it seldom is. It's usually a struggle to get what you can in the market. There are times when you can make a big move. Those times happen 4 maybe 5 times a year. Most of the time though it's up and down, back and forth.

With this market unable to show volume on a rally, I'm forced to be careful and regard any advance as suspect. This morning proved to be the same thing once again. Caution is the best advice right now ... on both sides of the equation.

Volume still lacking. I'm starting to book a little of these gains and cut long exposure. If we are wrong and the market gains better traction, then we will add back. The early enthusiasm wanes and the volume just isn't there.

The early numbers show good breadth but again, I don't see a significant increase in volume. That's keeping me defensive this morning yet again.

Although I made one purchase around the opening, I've done little more here. We have a big advance on a Monday morning and I'm not in the mood to chase this enthusiasm. We put our exposure on last week.

This morning we are seeing that follow through rally possibility line up that we talked of last week. Before we get ahead of ourselves, let's consider what it would take to turn these charts around and make them bullish.

First and foremost, we need to see higher highs and higher lows. That's the definition of a trend and so far that trend is down on an intermediate term basis. Secondly, we need to see volume that shows expansion on up days, contraction on down days. So far we have seen the opposite. Lastly, we need to see a passage of time so that a transition from one direction can transform into another. We have recently witnessed a market that has lost momentum in the down direction and has basically gone sideways for a week or so. That provides the possibility for a turn attempt.

The market has been oversold of recent again and certainly is at a juncture where a rise is possible. Before we read too much into it however, recognize that a lot of work will be needed to change the current technical picture.

Having said all of this, you may wonder why we want to have longs on the books at this juncture. Simply said, the opportunity to make a little hay in that direction looks ripe. I stand by the idea that we need to consider shorts at reasonable resistance points on the way back up. Unless this market indicates otherwise, such a move will put the odds on our side for the next turn back down. I like playing with the odds. Note that I said consider. We always need to formulate a thesis of what we expect as the likely possibility given what we see in the market on the timeframe which we reference. That doesn't mean that we stick to that thesis dogmatically without considering the latest evidence. It does mean that we remain flexible and consider what the market presents on a day-to-day basis. Whether we change our stance, flip it on it's head, or stay with it depends on what the market says and does. Doing anything else is a disservice to your portfolio.

ACe Talking: Twisting and turning higher:

With my new-found ability to twist and turn with the markets (and avoid that sudden bout of deafness which afflicted me in 2003) I start to smell something a little more sustainable on the upside here. Looking over several charts at the weekend (many of which found their way to the editor of this site) I see a turn to the upside. I agree that 1120 SPX and 10200-300 Dow are the levels to aim for, but am not so sure about those being an easy short.

The technical indicators we had a week or so back were enough to set my alarm bells ringing. When you see indicators that were last seen in February or March 2003 you have to raise the possibilty that an important bottom may be in place. This means something that is more than a bottom for a week or two, but perhaps for the rest of the year. Now this may seem odd coming from someone who smelt a 20% fall coming, but that's life. The only way I could have lived with these technical alarm bells and seen a falling market was if it were to happen very quickly. It didn't, and now the chance has gone. SPX 1082 (ie, the 200-day ma) is the line in the sand, and it wasn't crossed. Another day maybe, another year perhaps.

So I sit long, and pray for June 18th to come and go quietly. I have never been a comfortable long player in this market, and no doubt will not sleep so easily, but that's life trading these markets. I'm just grateful that the ability that saw me prosper in the 1996-2002 period was not totally drained in 2003. It's back, and I'm loving every minute of it!!

Today, we have a decent move higher in Europe after a hesitant start. Markets like India and Brazil have put in what looks like quite significant bottoms, and are rallying off these (should relieve selling pressure from hedge funds in various other markets). I also see oil turning lower, or at least my chart tells me. Where all this takes us is anyones guess. I am only interested in getting these twists and turns right, so not too bothered about forecasting. Wednesday afternoon of this week is long-term in these markets, so my main aim is to get today right. God only knows what tomorrow brings!
ACe

For a day where we finally had some activity, the overall picture didn't change a lot. We still saw low volume on a push higher (hint ... hint ... not very bullish) and we saw headline stocks get outgained by the small stocks, and we saw weekly closes that, for the listed issues, are the lowest weekly closes for the year.

Additionally we have an oversold market that has worn out many a player and has left most confused. We know that there are a lot of short positions still in play and that can ignite a move higher and that move would have accompanying volume. Don't be fooled though because if we do catch a strong tailwind here, it's a good shorting opportunity as well as the opportunity to book some gains on longs, not an opportunity to jump on board and look for even higher prices. A NASDAQ 2K is a welcomed opportunity to unload and look short. SPX 1120 would be the same. DJIA 10200-10300 would be a signal to turn and run. A RUT at 560 would have me licking my chops while 570 would cause me to start salivating.

So, that's it for now. Have a great weekend and get ready for next week. If we have timed this right, we may finally get a little spark in the old engine and be able to make a little hay. The market has about a week in my estimation to make a move that's more than a half day. Let's see if it can.

The market actually looks to be holding green here into the weekend. Volume is going to come in real low again and that's concerning but unless headline risk hits us over the weekend, look for Monday morning buyers to show up again. I'm carrying quite a bit of long inventory (most I've had in 2 or 3 weeks now) into the weekend although it is hedged with index shorts as we added financial shorts today.

It's interesting to see that the SMH couldn't lift on the better book-to-bill ratio. The early push there faded reasonably fast and it seems that nothing is enough to get the market excited anymore. If boredom were able to get the participants buying, the we would have a heck of a rally on our hands wouldn't we?

I've been pretty busy today as the market finally has offered some opportunity to trade a bit more aggressively again. We are seeing that late afternoon death march once again and the shorts we put on are making that feel ok. Most of our purchases have been in small caps and those stocks have been the best performers today as a group. I continue to trade in and out of stocks and am wary of getting hung out to dry. Sure didn't want to see this market go red though but it's starting to look that way again isn't it?

The low volume seems to be getting lower. I've started booking a few profits here and took out another short in the name of XLF. These banks are strong today but they have been rising on less and less volume so they sure look like good shorts. Looking to add to the RKH short as well before the bell.

The breadth of the move today is good and although we are likely to get a bit of a pullback here that pullback is likely to not turn into red this day. There are a lot of fast fingers out there though so you have to be careful. Best bet is to book some gains if you have them and keep some on the table. You win both ways in such a case.

The low volume push has held. The real key will be how they end it today. A positive close without a late day fade would give some impetus to step up to the plate come Monday barring any exogenous negative news. If we see late day weakness yet again, then all bets are off and we are still stuck in the muck.

I'm not doing much of anything having done my work early. All the positions we added were small as we are taking baby steps on upside plays. I added to CYBS a bit ago on the midday pullback. That one is trying to breakout. Rather than making the same mistake I made recently with FARO and leaving on a rise, here I'm adding and looking to see if it can break higher with us riding a bit more stock. This is one area I've got to get better in ... pressing a position that has momentum (up or down).

I'm off to tend to some other items. Will check back in a bit later.

With this rising market, the one absent piece of data is volume. On options expiration we have no volume. Again, this is a lack of selling, not overwhelming buying. Continues to keep me nervous about how far any kind of rally can move. These are renters out here and short coverers. Both can turn on a dime.

I like the smell early here although today is options expiration and the early rise is the late fade of late. Add to it that today is Friday and the weekend worries are around the corner.

Despite all of this, I've made a few purchases this morning and added back a short on the RKH. I still like the odds of a little bump up next week and am looking to get a little longer in front of that. If things work out, then we can get a bit of a rise in our individual issues and add back to the shorts as they rise. Wish it were simpler where we could hang just one direction as a rising market makes that wish come true many a time but right now we are in a down trending market and they come in fits and starts.

ACe Talking....your flexible friend:

The key to being successful at this investing/trading game is to have the ability to listen to other points of view, and assess them. This is a skill that eluded me in 2003, and it cost me dear. With the help of this website, I have managed to add this new skill to the many talents I have to offer. Taking this new tool, I have chewed over the possibility that this market may move upwards, and cost me on the short positions. I noted the rising Asian markets today, and saw the news that came out of the tech sector after the NY close (book-to-bill ratio and Q2 computer shipments). I also note the turn in bond prices (2-year auction went well yesterday, with good Japanese participation) and also the increasing possibility of a correction in oil prices (chart of crude could be turning here).

I also listened to that bald bloke with the beard who is on CNBC. He says that he has received many e-mails talking about the market being set-up for a 20% fall (a crash). I thought I was one of a few who though this, not a flipping army! Don't like that.

When I add these things together, I smell a rising market. Could be bored traders pressing a few buttons, but rising all the same. SPX at 1120 or NDX at 1440 won't take too much button pressing, so I run with a few less shorts, and let the sands of time kill the option prices.

Of course, I remain flexible, so could turn on a sixpence (or whatever coin you people use). With poor weather today, I can keep an eye on things. Have a good one.
ACe

Book-to-bill ratio comes in higher than expected and the futures are higher as well. Relationship? Probably to some degree.

This is a market that has many a folk wanting to get long but just as many or more willing to get out as soon as it starts to move. It's like a big bus full of people with no one behind the wheel. When the bus swings one direction a few more folks not wanting to go that way jump off.

Last night I went through a lot of the charts of favorites ... stocks that have held up well through this malaise. I put a number of orders to start small positions in these stocks this morning. I'll counter that will a short in the indexes depending on how things act. I want to have exposure on the table for the next move which I believe to be higher short term. The thought continues to be that we inch into short exposure as we move up. With the market refusing to buckle and with the passage of time, the likelihood of another attempt to rise increases on the short term horizon.

Today is options expiration. Don't know if we will get volume or not. The last three days have been unbelievable slow.

Other than a little squaring of the books today, I did very little with respect to trading. I spent most of the day doing other things that need doing and occasionally made a move here and there. I know this is boring and it sometimes get's that way. In my younger days, I would chase this, and chase that, and spin and spend eating some of my capital away. I've learned over the years that if you make gains when they are available and do a good job of keeping them when they are not, then you end up coming out ahead of the pack. So, I drink my tea, do this and that and simply wait for the most part.

I'm expecting some sort of a move higher here again in the near future. I've added a few small positions and have removed a little more of those short positions in anticipation. I'm back to maintaining a little on both sides and a healthy dose of cash. At some point we will put it all back to work again. Until then we play small, preserve our gains and wait it out.

ACe Talking: Anybody home ?

Another exciting day in the markets I see. Apart from a few traders pressing some buy and sell buttons now and again, we really do seem to have gone to sleep. Hopefully, they can keep this torpor going for another month. With the continued draining of liquidity, you have to expect this sort of action. Another example of this is the figures showing investors pulling out $2.15 billion from junk-bond mutual funds in the week to 12th May, which was the second largest on record. Quite significant.

This static market reminds me of Japan in that first mugs rally in 1993/4. We had the big rise in March-June 1993, then corrected and drifted back to the highs in August/September. We then fell 5% and traded in a range of 20,000 to 20,500 for a month. We couldn't rally higher, as the liquidity was being sucked away, and we couldn't drop lower, as there was the support of the 200-day moving average beneath us, representing the bull/bear pit. With interest rates low, and the economy in recovery mode, why drop into the bear pit?

Sure enough, after a month of doing absolutely zilch, the market dived through the 200-day and another 20% lower. I can smell that on the horizon. Fingers crossed it's after June 18th.

I wonder if we have seen the turn in the bond market? I did suspect last week that sentiment was becoming more positive. This may provide a reason to try and rally the stock market, as the rise in yields had been taken as a negative. However, as we discovered in Japan, rallying bonds do not always provide a reason to buy shares. In classic investment theory, bond prices and stock prices should move in opposite directions. The coming economic slowdown (aided by oil and overspent consumers) is NOT a reason to buy shares. Don't you ever make that mistake.
ACe

With an hour to go, I'm pretty busy doing odds and ends. Not a lot of reason to stare at a screen when there's so little opportunity so I keep myself busy doing other things. That keeps me from overtrading as well. At some point this market will offer a better opportunity ... either higher or lower, but right now it's just not there.

Today continues to bear the mark of market where the buyers are simply absent. We are drifting lower as a result. If we break support levels, then we will see a quick acceleration of selling I suspect. If we hold, it's like yesterday all over again where some bargain hunters buy and short covering kicks in. I wish I could say it's different, that I'm putting a substantial portion of my portfolio on the line, but that's not the case as I preserve capital and take small profit here and there while keeping risk closely in check.

Maybe ACe has got it right ... we should place our bets and walk away. The dull trading that's taking place right now is enough to put a baby to sleep, then slap him hard on the bottom when waking him up.

I'm off to take my morning jog. Be back in a bit.

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