The Daily Dose of Trading Comments

We started to see some selling in that last hour, but then the troops arrived and ran the sellers off. The most disturbing problem I continue to see is lack of volume. Today was the lightest volume day of the year on the NASDAQ on a day when we saw some of the best percentage gains for the year. That's not the way it should/needs to be. That can change but you definitely need to keep it on your radar because if it doesn't improve soon, it will invite sellers to short this market.

Speaking of the positives though, the late day buying was much needed; the good gains held all day given that late day buying; the internals were quite strong; the financial finally found some footing in front of the Fed mind you; and the new highs are starting to expand and that will be critical going forward this week.

We maintained our bullish posture and although we booked some profits in that last hour, we continue to maintain our bullish bent and are slowly adding some short exposure along the way. The market was able to break above the short term resistance on the SPX and should likely challenge the 1190 area next. Probably a short term short sell at that juncture though at least from the look today. We may see some posturing come end of day tomorrow and another strong day up, especially if it comes on light volume, would be an invitation to be a bit more aggressive in booking partial gains and putting a bit more short exposure in place. We will have to see what tomorrow brings but that's the thinking tonight. There's earnings reports after the bell tomorrow that could hurt (GOOG) and the Fed on Wednesday and the Presidents State of the Union speak Wednesday night. Lots of cross currents that will likely show some volatility as a result.

The market has held it's gains all day and as we approach the last hour the question is whether it can get a strong finish. Actually, if it could hold these levels that in and of itself would be a positive. Earlier I had no gripes but oil has been moving higher and volume has ended up lower than it appeared earlier so there are a couple of nagging concerns for the finish. I've been putting some order in to take some partial gains if we start to slip. Just being cautious as the market can't necessarily be trusted given what we've seen this entire month. Benefit of the doubt is to close strong but I'll be watching closely.

On a short term basis it's really positive today. The SPX broke through that first resistance area at 1177 and is holding above it. On my personal e-mini futures contracts, I'm using that area now to stop out and take profits if we are to fail as the day proceeds. Doesn't appear that will happen though. Breadth is solid, underlying indexes looking fine and volume is decent. In fact, I can't find anything negative about the way the market has performed this morning. All this suggests that we will see strength into the end of day, not weakness.

Looking forward, we have GOOG earnings tomorrow and the Fed decision on Wednesday. Those will be the next catalyst most likely. In between there are many other earnings reports, but minor ones, and some more economic numbers of which the ISM number could provide some short term market gyrations. Other than that it looks to be positioning in front of the Fed.

If we can get a bullish move into the close today, tomorrow may provide a good chance to take some partial profits if you are trading very short term. Otherwise, it appears that the market is finding itself here and that up until the employment report on Friday, we could see some further gains.

We are not seeing any evidence of selling this strength today and that bodes well. I continue to look for and make small purchases in stocks that have reported and are sporting good charts.

Almost an hour into the trading day and we are seeing our first signs of a pullback now. The question will be do they buy it or sell more into it. That will give us the direction for the day and the story should be told within the hour.

I've bought a few more stocks mostly adding to existing positions. Was stopped out on the NEM long but have been hesitant to do much on the long side early.

The geopolitical setting is supportive of higher prices today as are a number of other factors both technical and fundamental. The M&A activity is realling starting to heat up again as corporations see value in others at these prices. Most importantly we have had the worst January since 1990 and the past week we began to find a floor again. There's nothing to guarantee that a little sideways action is a precursor to higher prices just as it's no clear indiciation of lower prices as prices break downward out of the wedge, but it does provide boundaries for which a trader can take a position. Setups are always what you are looking for as a trader and your time frame dictates the way you look at the charts.

Although we have not completely avoided the carnage of the first four weeks of January, we continue to hover near the levels we began the year such that a good day or two would allow us to move back into the black. When things are tough that's where you need to focus. Keep it close keeps you spirits high no matter how much gloom hangs over the street (assuming you are long of course).

Although we are looking at a higher opening, I don't believe it's time to chase. More likely we still have a lot of backing and filling to do as we stumble higher. Lots of economic news this week so there's plenty to worry about.

I've got to cut out right before the close today so this will have to serve as the wrap. Unless we collapse into the close today, though disappointing the market has held at high enough levels to leave the possibility of a move higher next week. The timing is right, there is certainly enough nervousness and worries, and the charts support it. Problem is that nothing is guaranteed and this market has hardly handed out guarantees of late.

We will likely end the day with about a 5:1 long ratio with about 40% cash. That seems about right at this juncture. We are positioned for a move higher (still looking for it) that we can slowly scale into and take on short exposure. Lord knows if it will come or not. All you can do is position and that's what we continue to do. It's going to be a long weekend and unless there's a disaster in the geopolitical arena, there could be some bidding up of prices finally come next week. Have a great weekend, get some rest and be ready to get to work on Monday. With the Fed meeting on tap plus lots of economic data for January and December, including the employment report, it appears to be another busy one ahead.

The market has been beaten up for so long that it's not all that unexpected that the first attempt to move higher (last few days) is sold hard once the selling begins. Afterall, haven't we all been conditioned to think sell the past month? No one wants to go through that again.

So the weaker holders are pushed out leaving those who are more committed. The question then becomes, are they really committed and can they outgun the sellers. That question is the million dollar question because the answer to it gives the answer to what you should be doing right now. Since we don't know the answer and never really do (although sometimes we have a better feel than at other times), we instead position and react given what takes place. Anticipation is ok as long as you are ready to reverse gears if wrong. Anticipation with a plan is find and dandy; it's just when there is no plan or you fail to execute the plan that it becomes problematic.

With the last couple hours of the trading day and week bearing down on us we will likely be testing those intraday lows again here shortly. If you are leaning long you should hope that the committed group does have some firepower otherwise we may need to execute Plan B.

So far the amount of slippage the market has recorded is acceptable but if we get much more we are going to have to think defensively again short term. We have laid more money on the table as the week has progressed as we have shifted into companies that have reported both on the long and short side. At a 50% long, 10% short split currently, we will either need to hedge, take a little of the longs off, or a bit of both if we are forced into a more defensive stance. Of course the desire is not to do so.

The internals are quite negative again, the volume did swell on that selling that took place to bring us back towards the average and it's a coin flip at this point as to what comes next. Another walk in the park, eh? Tough start to the year. It is at these time that you have to continue to focus on what is important and that is to not dig a hole. Money will and can be made if you have your capital when the time is right. In between it's important not to fall back to far.

We are slipping a bit more as I write but volume has virtually dried up. That suggest there are no buyers at this juncture and maybe the geopolitical concerns are taking a toll here early. Unless we start to threaten the majority of the recent gains I'll hold onto the majority of positions but you need to respect stops in this this market. The counter of respecting stops is respecting entry points. If you can't get in at the price you want, walk on and wait for the next trade as your risk/reward changes each time you lose patience and it usually isn't in your favor.

All the majors are red but underneath it's rather mixed on light volume so far. I expect a choppy day and have been busy adding a few longs and a couple shorts. Exhausted already and we've just begun. Earnings season is a sapper as the nights are late and mornings early as you must prepare constantly to dance with the elephants.

The market is all about time and price. We saw new highs coming into the year fail and price drift and finally drown lower. With roughly 3 months now between the October lows and the January lows and with roughly 4 weeks of lower lows it could be that time is finally on the side of the markets to stablize at these lower prices and to probe higher. The news flow last night and this morning is generally positive. MSFT put a soft positive tint to the trading last night and the GDP isn't so huge to worry the interest rate crowd nor low enough to worry the growth warts.

The problem is that a lot of damage was done since the beginning of the year and therefore there's a lot of damage to overcome. I can almost gurantee you it won't happen in a straight line. There's going to be backing and filling if we indeed or to climb higher.

This results in us having to take shorts on as well as longs. Just as we have put a lot of nice charts into play on the long side, we must look to put a lot of ugly charts in play for the downside. We started doing that yesterday into strength and will look to continue today. A portfolio that spreads between the two should see outperformance in a back and fill scenario. The object of such a portfolio is to trim here and there as strength or weakness increases the value of the underlying assets.

Today is likely to be quite tricky in trading and thus we could see a very jumpy day. There's plenty to worry about over the weekend and there's the positive vibes to begin.

There is a deluge of reports after hours of which the biggest name is MSFT. It doesn't disappoint and trades up giving as nice tone to the start of tomorrow. We have spent the better part of this week slowly moving into names that have already reported, have good charts and appear poised to move higher. Today we began to do the same with the short end of the stick taking some positions in stocks that have reported and show ugly charts. We are likely a bit early there but it gives us the hedging action to help when the inevitable down days come forward.

It's been a tough month and as we slowly climb back towards even we have to be especially cautious not to let our guard down. Having sidestepped the heavy part of the carnage puts us in better shape than most but that can change quickly if we don't stay on our toes. Certainly one key to successful trading is to protect your capital when things are not going so well. Much easier to start making money if you don't have to climb out of the whole as well as up the money hill. Good night.

Again we are seeing late day strength rather than weakness. I did put on a bit more short as a hedge but am looking forward to the after hours news to see how that plays out. Some strength into tomorrow would set up a good test of resistance and allow us to scale out a bit more.

After looking at the charts again, I've put my ideas of any buys on hold. The SPX failed right at that neckline we talked about yesterday. I'm continuing to book profits if stocks fall intraday instead. Also looking to add a couple more shorts if we can make the case on a stock by stock basis.

This market continues to exhibit extreme nervousness as we just saw a bout of selling attributable to nothing really. It didn't look to be a program so much as tight stops that triggered. I sold off a bit of our positions earlier and am looking to buy a bit back now if we can get some decent setups intraday to work with.

Unlike last week, today I'm being very cautious with my longs. I've a number of them with reasonably tight stops underneath to either take all or partial profits. For example, I was just stopped out with a small profit on PCP; a trade we entered yesterday I believe. We got a nice thurst higher this morning on ok volume but the breakout didn't hold and now it's coming back in. So we stop out. We can always buy it back if it reverses and takes off again. Ideally we would like to buy it lower now as it comes back in on the failed breakout. It's has a nice gap up for support so we will be looking to re-enter. It's just a matter of when.

Don't be fooled into thinking that you have to stay with something no matter what. For a buck and a couple of pennies you can jump out and back in if need be. Better than riding a profit back into the red at this juncture.

Sometimes it's not always clear if price action in a given stock is just random noise or if it means something. Take a high beta, low price stock like RTK. A reader suggested this one a couple months back and I started watching it. A few weeks back I made the first purchase and then another. Yesterday it was down to support and I seriously considered the add there but couldn't muster the courage to pull the trigger. Today it's up 10%. What gives?

Well, the high beta stocks are high beta for a reason ... they move a lot. A lot of times that movement is more random than real so you can't live exactly by technical patterns but instead by instinct and risk management. You can make some good money if you get hold of one of these stocks and they go goofy in your direction. At the same time, since they are risky, you need to clearly have an idea of what to do and where you will exit if it appears to be a bust. Tricky.

The market came back nicely this morning and I'm suspecting MSFT is going to help us tomorrow with it's report after the bell tonight. Don't have a good feel for the GDP number though and whether it hurt or helps. We are taking our largest risk into an earnings number holding MSFT today but it's a large cap and shouldn't get crushed unless it's way light on revenues or profits. I don't expect that and with the expectations low for this quarter, seems like the upside potential is finally there so we will stick with it.

As you have seen, I'm typically to shy to hold much stock into earnings on most any company at this juncture. A small position is ok, but trying to stay away from large positions. Better to do your picking after the reports are out. Works much better.

The proverbial wall of worry. This morning the market truly is scaling the heights of that wall as the gloom was a perfect backdrop for a little buying. The players have finally seen early selling lead to some bids under the market which is a character change. Be mindful that resistance is not that far overhead, but right now the bad action is being bought ... first time this year.

I've added a couple shorts and a couple longs this morning but am mostly watching the internals to see if they can hold here. Biotech and tech are the two main gauges early. We've seen the destruction that can be done. We will have to move quickly if things start down hill again. Could be self fullfilling as I'm sure there are many others thinking the same thing.

If the market is going to climb from here, it certainly is getting some worry early in the way of AMGN which missed estimates and guided down. That looks to be weighing on the futures a bit as a result. Some economic numbers up shortly and that could have a positive impact as little is expected. The big economic number is the GDP estimated due up in the morning.

We need to be cautiously optimistic here as finally there was a little life to what has so far been a lifeless market. How this market finishes the week will tell us a lot about where it intends to trade higher near term or continue downward. Resistance areas are clearly demarcated; especially the 1178-1179 area on the SPX.

We are taking a hard look at adding some short positions in stocks that have fallen out of bed and reported already. Looking for a rise in price with little volume. AMD is an example.

It took three plus weeks to get a strong rally into the close and just as we have grown weary in our wait, the pleasure is somewhat muted as a result. Internals were strong, volume was average, and finally we saw a desire to actually make purchases into strength ... something that's been missing all year so far. Not a moment too soon.

Before we get all giddy though, recognize that the SPX still hasn't closed over that neckline area we identified this morning and the technology stocks (which led today's advance) still have a decent ways to go to even get back to their resistance points. That's both good and bad since it means we could run a bit further and bad in that it says that's how low we had traversed.

Like a week ago, the key will be to see how this market behaves into resistance now; the listed issues being the first to hit it likely tomorrow. I expect there to be selling as a result and will look to do some hedging as a result; not heavily but some nevertheless. We can also look to trim as well.

Tomorrow we have some big reports after the bell with MSFT leading the list. The morning sees some economic news before the bell as well. Pinch yourself if you don't believe it's real but look to pinch yourself once again if you are thinking you want to chase this move. This is not a chaser. If you weren't already positioned, you need to wait on the some of the backfilling now in the case of most individual issues.

With a bit more than an hour to go, no evidence of the sell programs today. I've been watching the futures looking for a signal but either they are waiting until closer to the bell today or they have decided today doesn't make sense. If we ramp into the close, it might be a good time to consider whether to book some partials, hedge with some index shorts or both. I know it's on my mind.

The last hour or so I've been walking down through each of our existing positions in the portfolio and looking for situations where we have earnings out and a good risk/reward setup. An example is ELX. It has pulled back after reporting decent earnings to it's 50 day moving average. It's a bit concerning that volume has been as high as it has been but we can buy at this juncture in reasonable size and use the lows of the past couple days as our stop out if it doesn't begin a bounce.

The general market is holding up ok but the buyers really are having a hard time stepping up to the plate. Finally the enthusiasm seems to have been beaten down enough that a bounce can actually develop into the afternoon. Today will be a good test. An up day yesterday and an early advance that has already been halved. Will the sell programs crank up again and will they finally be bought? Don't know but am keeping stops close in case it occurs yet again.

The market took a decent hit when MO reported earnings as that took the headline DJIA down a good piece. Unfortunately that likely won't lift today and will be a drag as a result. The internals have come back in some and is there anyone in their right mind who doesn't expect the late day selling again? All of this adds up to the cautiousness that we are exhibiting. This has been a very difficult month and a breakeven this month would look really nice. Realistically, doesn't look to happen right now. We are sitting long only and looking for a thesis that will lift this market. Since we can't find one that holds water, we feel as if we are positioned wrongly. Positioned wrongly and making up lost dollars doesn't seem to add up does it.

Before we get too negative, there is a thesis for a short term move higher but the timing of that move has been problematic and that hasn't changed. For now we have to play small, play safer and wait it out. Seaching for short candidates hasn't been an easy job lately as so many are so extended it makes the risk/reward unfavorable. So we stay stuck in the rut for now.

It's been a long time coming but this is the first day that I see this year where all the important underlying indexes are showing strength. From financials to tech to biotech, to almost everything else. I've made a few more purchases this morning but continue to be reluctant to make big bets. As I noted in the early piece today, it's really hard to get bullish on the market here. It should, could and currently is putting a decent bounce in place, but I suspect we won't get much higher before we see that selling start again. Maybe this time will be different but don't lose sight of the need to be cautiously bullish.

Not to be detered, the bullish forces are hard at work in the early going again pushing the futures higher just like yesterday. I thought that those forces had a good chance of maintaining the market yesterday and avoiding the late day selling but it appeared nevertheless and the markets ended near their lows though still positive. As a result, I took a hard stare at the chart of the SPX again last night removing all old lines so I could pencil in some new ones. I do this to try and get a fresh perspective as the old lines draw old conclusions. What I see isn't very pretty and it's really hard to find a reason to be bullish here. Take a look.

What I see is a potential H&S top that has formed with the necline already broken at roughly 1178. We need to see a close above 1180 to invalidate this formation. We also see the 20 day MA starting to cross the 50 day up around 1190. That area is likely to be the death knell to any short term rally if the necline doesn't get them. On the support side, we have stairstep support at 1160, 1144, and again around 1130 or so where the 200 day MA comes in.

It all means to me that we have to be careful this time not to simply believe that we will rally because of the declines we have had. Maybe there's a reason why every rally is being sold!

They say some of the best advances come as a result of climbing the wall of worry. If there ever was enough to worry about it sure would seem to be now. The gains of the last 7 or 8 months have disappeared. The program selling that hits with an hour or two to go each day seems unapproachable. The sentiment is definitely shifting to bearish. The declines have come fast and furious somewhat stretching the normal time/price ratios. Although the market did advance today, it does so on low volume, deterioating internals and near the low end of the day's range after stair-stepping down for all but the first hours high. Not exactly what you would like to see. Yes, there's plenty to worry about. Makes you think the worse is yet to come.

After hours they are juicing the techs again but that's really not what the market needs. The headline earnings have the aftermarket crowd excited yet again. Almost as dependable as the sell programs isn't it? See you to tomorrow.

It's that time again ... program time. Will they or won't they unleash the torrent of selling that inevitably pushes us lower. The internals have deterioated all day but are still positive. In fact, there's still the hint that today will be different. I'm hanging in their long thinking that the odds favor a move back to the highs, not the lows to end the day.

The afternoon lullled looked to have been hit with another spate of program related sells that took a little less than half the gains off the technology and small cap areas. I bought a bit of the IWM for a trade into the weakness and am pretty much standing pat. We either get a lift into the close or those programs win and we sell down yet again. I tell you, if I were to make a wager, today looks as if the bulls have the edge and I wouldn't look for that fade into the close.

The setup this morning is quite good. The early strength wasn't faded (a tell) and the follow through did occur. Now we are likely to see some reasonably range bound trading for a while as things settle down and then the afternoon heavy lifting. At some point these program sells that start with a couple hours to go in the day are going to get slapped down and cause a squeeze higher into the close. I don't know if today will be that day but the setup is there if it happens. Don't know if the easy money ACe talks about to short and cover after the close will be there today.

Finally and opening that, even though it was up, looks to be broad based. Could stick. I did add a couple more starter positions in names off the list we gleaned this weekend where earnings were received well. Let's see how the next half hour plays out.

ACe has some timely thoughts below ... as the smart money is typically viewed as the late day while the dumb money is the opening. Well, here's another higher opening setting up. Do you want to buy it?

It was a restless night as the images of red kept invading my dreams. It was one short week ago that all was good; we had avoided the early selling in the markets, we had gamed a turn, we caught the turn and we were considering where to sell and start some short positions. Those thoughts lasted all but a half a day as the gains were taken away and the exposure turned into a noose around our necks.

Now, more than 2% lower in the portfolio we wonder what to do next. It's the give up that's always hard; that inevitable give up that signifies the bottom. Sometimes that comes in the form of a mass selloff with a scent of panic in the air. Other times it takes the form of continued but slow torture where you suffer the slow death of position after position. Eventually there just isn't anyone left to sell anymore. The former is easier to game while the latter is more difficult and it appears that this latter case is what we are faced with.

Technically I mentioned a combination of support points appearing soon that could provide the technical backdrop for a halt of the decline and the setup for a climb higher. Recognized that the areas mentioned have to be considered as general areas as there's no specific point that anyone can give you. No one really knows. It's just that we are slowly coming into those areas and it's likely that we will soon see the turn as a result ... a real one that no one trusts and that therefore works. Too many people were gaming that last one. It's when no one expects it to hold that allows it to do so.

ACe Talking: Shining some light:

I note the recent attempts to buy a bounce in the markets, and the confusion over these regular late-day swoons. I remember a while back reading a book by a successful trader who said that the smart money is usually seen in the last hour of trading, and the direction of the market in that last hour is well worth noting. Since late December, we have seen selling late in the day, and it is now becoming self-fulfilling, with investors like myself grabbing some free cash by shorting during the day and closing the position after market hours, before repeating the procedure the next day. It's easy. In fact, its too easy, so expect it to end soon. Not now, but soon.

The selling is coming from the pits in Chicago via futures, and we have to suspect there is a big player behind it. It could be a large fund, raising cash to cover a hole somewhere, or it could be the same people who pushed the market higher in late 2004 selling those longs now that the election is out the way, as these longs won't be needed for another 3 or 4 years.

There is confusion amongst some pundits as to why the market sells off when companies report good earnings. As I said last time, ask a fund manager what he is prepared to pay for peak earnings and he buys bonds instead. No matter what earnings are released, the thought of profit margins returning to trend, and earnings growth moving to the 0-5% range, is enough to make anyone feel a bit giddy at these levels.

I saw a very interesting article in one of the Sunday papers two weeks ago, which showed a chart of the Dow from 1999 to the present. The chart showed three failed attempts to break above 11350 in 2000 and 2001, and the argument was that these same 3 failed attempts had now been made at a new peak of 10750. The outcome would be the same, with the Dow falling sharply now that the 3 attempts had been made. I looked at that last attempt at 11350 in May 2001, and noted that a 5% drop in 2 weeks was followed by a bounce back to 11200. We could see the same pattern, indeed, I believe there will be a move back higher at some point, but you will have to head for the exits pretty quickly. Alternatively, don't bother looking for the bounce, but just wait, then sell it.

I note some analyst upgrades coming through this morning, in RIMM and YHOO, and with the internet sector hitting oversold levels all round, it will be interesting to see if this sector can hold onto any gains. For any tradeable bounce, you want to see the market closing above the lows, and I believe these lows will be in the 1150-60 area on the S+P or sub-2000 naz. Don't move away from your screens, or you might miss it!
ACe

Sickening ... yet another sickening decline. When will it stop?

Other than a couple days last week where it looked like it might, it's been straight down and no mercy. I've really nothing advantageous to say as a market wrap. Maybe tomorrow there will be more to do and to say but for now it's more of the same and if your on the wrong side of the market like we are that means it's more bruises and bumps.

With the NASDAQ trading down today and the listed issues holding about even, we are slowly and inevitably setting up the indexes to all experience there support levels at virtually the same time. 1160 on the SPX, 10300 on the DJIA, 2K on the NASDAQ; they are all coming in around the same time. Usually doesn't work that way. Usually it's one or the other but not all. Don't know that it will turn this thing but that sure looks like a good moment given what's happened until now and the fact that it will be the first time each of them tests the key support areas. I'm thinking that might finally be the place to see some buyers consider the unthinkable ... actually doing some buying!

True to form, the late afternoon swan dive shows up right on time with the weak afternoon selling pattern continuing. I don't know about you but I'm about tired of this. The thing about the market is that it does what it does and there's not a lot you can do about it. It's adapt or die with the market and right now our adaptation is pretty much lying low and waiting for the most part. We may see a spike develop off this swan move but that's a hard bet.

Over the last week or so I've seen enough supposed washouts that I'm becoming numb to the thought. There may be a counter trade into the weakness today although it's clearly not a washout on the general indexes, but I'm seeing some individual stocks getting creamed. Look at GOOG again, the cell stocks like STEM and so forth. The chips still can't get a grip and the market looks sick. I continue to wait, to watch and to worry as our January is slipping away much like that spike higher last Tuesday where we gamed a turn only to see it ripped away the next two days and pinned to this donkey's tail. Remain cautious and if you game a move keep your time frame short and protect.

The selling in technology is unabated and continues to weigh on the market today. Software remains higher but the chips are singing the blues. Until they find some footing, until the chips quit dragging this market down it's really hard to buy much of anything let along technology.

I continue to shift out of stocks that are about to report or at least to keep the size small and to move into stuff that has already reported and is showing promise. When the market does find it's legs, that which is showing promise will rise and in between it won't fall nearly as much if it does follow the general market.

If the declines hadn't been as hard as they have been then I would think of shorting but I need some sort of rise to short into ... not these levels.

I see one encouraging sign this morning and that is that the volume is a crawl today on this decline suggesting that the sellers are tiring at these levels. I've mostly let stops occur and have reduced holdings as a result early but I finally made two purchases on retail stocks that have reported strong earnings and are now retracing (FINL and AIT) and both were small incremental buys. You have to stay cautious at this juncture but we are close enough to major support that you have to maintain some exposure lest you be forced to chase if/when it turns. It's just that you want that exposure in the right places. What a concept eh?

Another green opening is sold and the markets are under pressure yet again. I continue to retrench and wait. Until we get some sign that things are better it's best to keep your head low and attempt to minimize the wounds. If you are short, then of course you are still strutting with this kind of action.

If you take a hard look at the charts you will see that the SPX has travelled some distance to return to it's starting point. In a little over a year now we have move quite lower and higher from this spot we now rest in the in between, but find ourselves basically in the same spot whence we started. Such is the life of the market.

As I poured through charts this weekend concentrating mostly on companies that had reported or were about to, two things struck me. First, there were more positive actions in the stocks that had reported than I expected. That goes against the headline perception. Second, almost all the financially related stocks were mauled.

In the intermediate term picture, the markets have travelled back to a more substantial support area. With the oversold condition less oversold due to the sideways action early last week but still oversold, the rubber band is stretched but not critically so. There's still more room for down if that's the direction chosen. In fact, there's likely to be a lot of give up down in this area if the gloom continues. As a result, if you intend to game a bottom, don't start to early and be very careful to chase anything.

I've simply done a lot of home work and am intent to continue small buys in stocks that have reported and that are showing promise. Even then, I'm going to be slow about the buys and attempt to catch weakness to buy into.

There are plenty of stocks to sell as well and whenever the counter trend rally arrives, we'll have to brush that list off and traverse to see which setups are appropriate. So much damage done on earnings that when they bounce they will likely be sold hard again.

So, in the biggest picture, it's starting to look as if the 1280 SPX thoughts have died a slow and painful death. The picture is looking more like expect a failed rally to develop somewhere over the next week or so that will initially poke back towards 1200 and then maybe look to advance back towards the earlier highs on the SPX. Even if we were to reach new highs that is most likely to end up a failed breakout as well as a failed rally and we have to transition to a more mixed portfolio (longs and shorts) and then to a shorter portfolio. In the meantime we will attempt to nurse our wounds and preserve our capital as we wait.

With the rubble of another defeated trading day behind us we look to the coming week. I can tell you only one thing and that is that we are definitely seeing enough gloom and doom to wallpaper even the most optimistic of bulls and that my friends is what the start of a tradeable counter trend move is made of. Somewhere in the next week of trading we will have pullled this rubber band way too far and the spike will be fast and furious. Unfortunately if you have carried to much exposure in the interim or put it on too early (as we did this week) then it won't mean anything as it will simply make up for the losses suffered in between. That's trading and you have to recognize that you won't always be right. The key is to understanding when you are and you aren't; to understand it soon enough to do something about it and that simply isn't easy to do.

I've a lot of home work to do this weekend as I intend to flip through as many charts as I can and identify stocks with tradeable patterns so that when the time comes we can quickly jump into them. Given that it's earning season that makes it even more tricky as you have to avoid the potential problems associated with those reports as well. A less profitable method, but simpler, is to use leverage and grab a chunk of ETFs when it's time. However you choose to play, prepare and lie in wait for the opportunity as it will come.

The market has been stair stepping lower intraday and I've taken profits off the table on the index long we were holding. Looks like folks are bracing for the end of day selling. I'm looking to make another purchase on those index longs for a trade if the SMH can hold up into the last couple hours. That's the key for a quick trade in my mind.

Overall, you can sense the fear creeping into this market and that eventually will lead to a tradeable bottom. Until then you nibble at low points and book some gains when you can if the surge doesn't come. Back and forth. What else is new?

The sentiment has indeed shifted and there are a lot of incremental changes that point to a situation where share prices can finally climb. Technically the picture is rather ugly here on a short term basis but viewed from a longer term basis it's not so bad because support lies in this area. So, the gap down on the NASDAQ is ugly short term but longer term, it's right a the last support area before 2K. Same can be said for the SPX. As a result, I'm not bailing on the long side but am not interested in getting too extended either. After the whipping adminstered the last couple days, I'm sure there are plenty who want to scale out of shares on any price rise and thus the reason the climb this morning is rather labored with quick bouts of selling showing up periodically. So we wait and attempt to slowly book some gains here and there as the day progresses. I suspect that they will apply pressure once more next week. The question will be whether the lows of yesterday hold or not.

I've not seen this much fear in a long time; not that the fear is overwhelming it's just that you can sense that no one is willing to put any money on the table anymore. Can you blame them? After being bludgeoned for a good three weeks, it's hard to step up to the table.

I've made a few small buys again and am biding my time once more.

Release of consumer sentiment causes a spike down. I'm buying a bit into that spike down.

The Daily Dose is a glimpse into the life of a trader, what he lives and breathes on a daily basis. Necessarily it is reasonably short term oriented as a result. Our trades typically last 2 weeks or so although that's distorted a bit by scaling in and out. Naked Trades offers a bigger picture view of where the market is and where it may be going. In fact, the last article Is the Seasonal Strength About Done written before trading started in the new year wondered out loud about the potential for an impending decline. We anticipated a best case scenario for the decline to work it's way to about 1160-1170 and we are just about there now. In fact we stated "In fact, if we start January with bullish advances that cannot hold, that scenario is quite likely and would provide a wonderful opportunity to position long for a decent retest of the highs." How timely.

Now that we are closing in on the target, do we have the stamina and are we gaucho enough to buck the trend? Remember, the fast money is made and lost at the beginning and ending of trends. We saw some serious losses the last couple of days as a testament to this fact. Will we see the fast money made soon as a follow up?

Rather than blindly anticipating a change, it's better to concentrate on what you wish to add once there are signs that the move is underway and then place your wagers. Make sure that you understand which trade is day or intermediate term trade and where your outs are. If you are wrong, you pay some capital. When you catch the move, it's likely to be quite rewarding. The three keys are to look for the right conditions to make the move, jump on trades that you have researched and are comfortable with, and know your outs in case you are wrong.

As for today, the market looks like calmness may rule. There's not enough data to cause another panic situation where everything gets slowly dumped and the weeks winners (shorts) are likely to take some gains creating some buying pressure.

When the market looks and feels its worse (from a long perspective) is usually when it's closest to a turn. I have outlined reasons why I felt a turn was to take place this week and it sure looked as if we were money on after Tuesdays move to challenge the 1200 area in the SPX but Wednesday crumbled and today turned into more mush. Now we are sitting at the lows of the year. What happened to that turn?

Many times a bottom is a dribble affair where those gaming a turn are slowly flushed out of trying and those waiting for the inevitable move higher slowly give up. That's what we are witnessing as the hope caused on Tuesday was but hot air and like hot air it quickly has fizzled taking the air that was left in the lungs of the longs and squeezing it till there is no more. Now that the charts are clearly broken from the up trend of the August lows, where does it end?

10400 on the DJIA looks like a good area of support as does 1160-1170 on the SPX. In fact we originally though the 1070-1080 area would mark the pullback. We are at the last logical level of support tonight on the NASDAQ and 2000 looks to be next if we continue.

Up until the last couple days we had been very careful to sidestep the melee that was the market. Just look at the damage. In three short weeks. the DJIA and SPX are down +3% while the NASDAQ and Russell 2K are sporting 6% losses.

This will end but to assume all will be well soon is probably dangerous. You can game a bounce but for whatever positions you consider or take, understand where you are wrong and what the time frame is.

Lastly, let me give thanks to those who continue to support he site through use of our search option or advertisement visitations. Your support is greatly appreciated.

There's a terrible stench in the air today; that of those unwilling to move out of the way getting bludgeoned. It's ok to work a trade, but to stand tall and proud with a sense of arrogance when the market is chewing longs up right and left isn't exactly smart. Yesterday I was almost 100% invested when the day began. By the end of the day it was roughly 60%. It stands at around 39% now. Even that isn't comfortable as I've taken the worst hit of the year yesterday and today. If things are bad, cut your risk and wait for the right opportunity. Right now it's ugly and getting uglier. We know it will turn but when. Doesn't appear to be today and given the way this week has traded, tomorrow is looking like a long shot as well.

It's hard to imagine any kind of strength into the close today but imagine that ... what know one expects to happen. There is longer term support right around the lows of the day on the NASDAQ and you can see that the SPX is also trading at support. If they don't break them down in the 30 minutes or so, look for strength into the close.

I've been dancing around long stabs at the indexes today and am about even on booked trades and am now quite long the QQQQs one more time looking for a move higher. Just working the odds and attempting to lessen the pain of a day gone bad.

Ace Talking: Game Over

The lights are really dimming fast on this global liquidity fest. All those pigs (bulls) that have been sticking their ugly mugs into the trough will hopefully soon get a decent bout of indigestion.

By now, you will have got the message that perhaps something is not quite right with this bull market. Although I would still be wary of getting very short until the 30 months runs out in April, I would certainly not consider being long until the rubber band is really stretched, like on Ebay today, or Symantic recently. We need to see that on these indices before any kind of bounce can get some follow through (1140-60 on the S+P for starters).

If you look around you, the sound of taps being turned off is quite deafening. Check out Brazil today. This is my speculative guage, and it is being hit hard again today, as interest rates have been increased half a point to 18.25%, pushing the stock market down almost 3%. The biggest tap of them all is set to be turned another notch in February, but how many notches is now the subject of debate. Can the market sustain a bounce ahead of that? Doubt it.

Talking of liquidity, I read today that the global strategist at Citigroup has moved from bullish to neutral on stock markets, as their measures of liquidity start to turn down. The only reason they don't move to a bearish stance is because valuations compared to corporate bonds are favourable. This seems daft to me, as spreads can only widen from current levels, especially when you get interest rates rising in places like Brazil. There are some accidents out there waiting to happen. Don't get fooled by the comparison with bonds, as bonds are very vulnerable at current levels.

What about earnings? Here is the problem. Ask a fund manager what he is prepared to pay for "peak" earnings and watch his face. Bet he/she looks like they've seen a ghost.

So enjoy the bounces along the way,

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