The Daily Dose of Trading Comments

Pretty rough day but the market did what it had to for the bulls to keep their optimism up. We made a few small adds into weakness today and ended the day slightly down but continue to believe that the risk is likely to the upside more so than the downside ... at least near term. Unfortunately our intermediate term views are not wildly bullish and we believe that even though we are forced to work the long side here we have to remain cautious and book some gains along the way. Patience with caution is a good way to look at the market this week. I'm expecting a push back to that 1120 area on the SPX before the middle of March but unless we get some change of character in the way the market trades in that timeframe, I'm afraid we'll just witness failure again on the upside. Between now and then there's a lot of trading to do so we'll take it one day and one trade at a time.

We missed that little bounce trade we were after on the SPX and it's a bit too dangerous with an hour to go to try and work it most likely now. If you are leaning long here, you want to see the lows of the day hold and in fact 1202 should hold on a closing basis. Some damage was done today but as long as we hold the 1202 area SPX we are ok. On the NASDAQ that 2045 area would be a good close. In fact, on a daily chart, a hold of 2045 sets up a inverse H&S that projects back to roughly 2057. For now I'm doing my best to stay patient and allow this to work itself out. Don't need to press on anything right here.

This biotech story is just too big today and is weighing on everything. In all my trading I don't remember a time where the drug sector, both traditional and biotech is so innudated with bad news. This is ugly and I'm looking to do a bounce trade again but am still waiting for the opportunity.

As the market approach 1200 SPX we started probing for a bounce trade on the SPX e-mini's. Unfortunately our tight stop executed once we were in the green on the trade and ended up stopping out for very little. We should get another shot at the same trade here in a few minutes and we'll try again potentially. Very tight stops though. Overall we continue to make very few small purchases as we continue to believe that the near term long trades are favorable especially with today's setback.

The watchword today is patience. Rather than getting traction the biotech sector is leading us even further down. We made a few small purchases once it appeared we might be getting something started to the upside but rather than traction we are seeing slippage and we are becoming less and less interested in doing much of anything here. Crude is coming in and there's a hodge podge of sectors that are trading slight up to flat. After the big run to erase last Tuesday's gains, it looks like we are going to have to work off some of the V shaped move before a further advance. I'm content to wait and watch. Unless individual issues warrant attention, we are likely to do a whole lot of nothing today.

Market starting to find it's footing despite the BBH problems. I've made some very small buys on weakness in the last few minutes thinking we could get a move higher now.

Very choppy range which we thought could be the case. Disturbing that we see volume pick up on down prices but that's been a constant reminder for most of this year on the fragility of the market. It's what keeps us wary of the durability of the advance. On the flip side, time is on the side of higher prices for this week at least so you can't expect a big fall as a likely outcome near term. Doing very little today.

It's a very mixed session so far with strength in oils and precious metals and things that come from the ground and the internet and chips. Software, the financials, health care and especially biotech are a drag. The rest of the sectors looked mixed. It appears a lot of push and pull. Probably a good reflection of what this market has offered of late. If you can stay out of trouble, there are places to make money. Get caught in a problem though and you can get hurt. I've made one small purchase. Pretty much sitting on my hands.

Market is pretty soggy out of the gate here with the ELN and BIIB news hammering the BBH. AMGN and DNA trading quite a bit lower in sympathy. Chips still gaining traction though as they approach the year's highs in the early trading. They may turn though as I suspect some short selling will materialize but if they don't break them lower expect short covering to squeeze them higher. It's a coin flip for today but the chips are starting to look as if that inverse H&S formation is taking hold and that's bullish if it fulfills.

I've made zero trades as I watch the early trade and wait to see which side gives.

Last week we saw a radical set of trades where it appeared the programs went wild. The spike down was almost completely offset by end of week and we pretty much start off where we were a week past. This V shaped spike on lighter volume deserves scruitiny as the lighter volume shouldn't be taken lightly. Having said that, there are enough short term factors in play here that could support a further move higher into the heart of resistance (old highs on the listed issues, 50 day MA on the OTC). For that reason, it appears a bit early to get active on the short side again and instead it looks to be one of those situations where we need to make some trades in the direction of the trend and to keep our time frames short booking gains as we get them. There are a lot of economic data points today that could provide some more of that jagged trading we have seen of late. It's also end of month today and that could add to the volatility as end of month positioning occurs. All in all, it feels like a lean with the trend market yet remain cautious. We have talked for a good 6 weeks about a nominal new high being the perfect setup for a bull trap. After Tuesday, I was reasonably sure that such talk was finished. Well, here we are again considering that. When I speak of a bull trap what I'm talking about is the situation where rather than doubting most everyone starts believing the move has plenty more to go. That leads to some nice price gains but the sustaining move doesn't occur and the prices end up either drifting back down or falling off the cliff so to speak. Futures mixed to start the day. Let's see what the income numbers do to it here in a few minutes.

Today we saw some follow through and ran right up into resistance again … the old highs on the DJIA and the SPX. The Russell 2000 is also approaching the old highs. On the NASDAQ it’s back to the 50 day MA. The CRB broke out to new highs today. It was broad strength across the board with the old nemesis of light volume. Again, volume can come along and we can’t dismiss the move too quickly on that note alone, but it certainly continues to be a warning flag about getting too comfortable on the long side.

Our desire to stay with the short term trend released some of the angst of yesterday’s failed follow through to the downside as we gain some of the monies back. We had a couple of early adds that gave us good gains during the day and we booked some of those gains as a result. We are approaching end of month and we may be getting some of that end of month markup behavior that is so often talked about. If the volume was better I would be less concerned but with the lack of strong follow through on volume we have to stay careful. A real indication on the strength of this market will come if it breaks the old highs and makes new ones. If there is no volume push then it’s a dead give away that we do in fact have bull trap occurring and one should be extremely careful to buy and hold. But that’s a ways off and for now we’ll go with the flow and book a bit along the way, just in case. Hope you had a productive day, week, and month. It’s truly hard to get a good read on this market and certainly hard to get the follow through needed on the good setups. Maybe next week.

The listed issues are the leaders to day. The chips are up strong but that isn't reflected in the NASDAQ which is odd. Can't quite figure that one out. SPX is back to testing the highs again. I've swung around to a long positioning but am still mostly in cash. Can't find enough entry points to move more aggressively. Being heavily bullish here just doesn't feel right but the market continues to move higher (especially energy) and it seems to be pulling most everything higher despite the doubt.

We couldn't get the follow through on the downside but they are doing it to the upside. Problem is the volume is light which has been the story of advances so far this year. Momentum is a hard thing to kill though ... especially to the upside as the long players are vastly greater in number and they are much more stubborn about liquidating a position.

We have pretty much turned the tables again and gotten longer this morning on the early weakness and then a bit more as the market started to show strength.

A couple observations. Love fest in the oil stocks. You know it won't continue forever and this has certainly been the place to be the first two months of the year (our biggest miss was leaving these in January) but it's very hard to find a reason to buy them here.

Precious metals. They are holding the 430 spot price on gold and NEM is giving nothing back. I've slowly been buying stocks in this area. There's a good chance these stocks will be the next big moving group to the upside and we are slowly accumulated with that idea in mind.

If you look back on the trading this week, it's rather odd. We saw a rather serious tumble early but no follow through and now we are back to where we began; full circle as it were. In between a lot of opportunities but in the end nothing unless you were extremely agile.

We are seeing little in the way of real activity this morning. Volume is down, internals mixed and it appears that most wish the week were done. We caught a nice run on XXIA this morning and book the gains a few minutes ago but outside of that, nothing much is happening for us. Utilities, chips and oil are up. What a strange mix.

I've been busy making small purchases in the majority of the stocks shown on the trade sheets. The market has shown that it's not ready to fail just yet so we may as well move our portfolio more in line with the short term trend which appears to be heading up again. We will remain mostly in cash but we need to be more balanced short term.

One of the reasons for starting this site some three plus years ago was to examine both the good and the bad to make us all better traders. We were perfectly right to be leaning heavily short yesterday. In the vast majority of such situations we would be rewarded for such a leaning but the market does provide ample reminders that to be leaning the right way sometimes can still be wrong and we must always be ready to accept that verdict. So, the leaning was quite right, the outcome quite wrong.

What else did we do right? We correctly recognized that, if we were to get follow through to the downside on this particular move, it would come by end of week. That timing made sense since the market was becoming oversold. Given that it could turn on us we began putting in stops to lock in profits or take small losses on short positions. That was right. By my quick calculations on the data last night, that move saved us some .6% on the portfolio which is a significant sum if you consider we are only up a little over 1% for the year with yesterday's setback.

One more thing right was to continue to carry our long positions throughout this move as long as they held up. They will provide some gains now if this move higher continues and they provided some cushion yesterday when things turned. One of the reasons to turn to the e-mini trading was to facilitate just such a move where we could truly be more two-sided in our trading and allow positions to run longer (even though we will continue to scale in and out).

What did we do wrong though? We did not strictly respect the stop out on our e-mini short. We new that if we breached 1192 SPX and held (especially late day breakout intraday) we were probably in trouble. Rather than stop out at 1193 as originally planned or 1194.50 as I had recalcualated the previous day, we instead let it run to 1198.50 before taking the hit. That's double the losses. These are highly leveraged instruments and the leverage cuts both ways. There we have to respect the stop areas ... literally as they can get us in trouble very quickly. That was wrong and we have to correct it going forward.

The other thing we did wrong was the way we traded the top in the OIH. I was so convinced that the OIH was ready to tumble that our entry points and exits were horrible. We continued to try and leverage into short positions when the index would fall only to get squeezed out higher when it would turn and run. If you are attempting to catch a top, it has to be done in reverse. You sell the strength and take partial profits when you get a move in your favor and you stop out at key techncial areas if wrong keep losses low if the timing is off. These trades, if you care to go back and analyze them, were probably the best example of how not to trade a toppy excess in a given sector. Very wrong.

So, now that we have aired those thoughts, what's next. Unfortunately the markets are in such a state that it's hard to take a position now. We have recaptured the 50 day MA on the SPX, but face resistance the rest of the way up. Momentum and timing now favor a further rise though.

The SMH is really the key in my mind. It refused to buckle under yesterday and held the 200 day MA which it captured a couple weeks back. We actuall have a crossover taking place on the SMH now around 33 which is where we rallied from yesterday. If the chips remain strong they will lead this market higher near term. Probabl the best risk/reward trade out there right now is to bet on the chip sector long and use that 32 area as a stop out. It appears we may have just formed are we are in the process of forming the second shoulder of another longer term H&S pattern on this index. Here's another look at that at that graph. Problem is that it seems utterly wrong for these stocks to rally here but maybe that's the way it is.

When the market moves unexpectedly against us as it did today, my first inclination is to get out of the way. I respect the market's ability to flatten you if you refuse to move out of the way. We took a pretty big hit today wiping out all the gains we had accumulated in the last few days. So it goes. If you think you will always position correctly and always win you are seriously mistaken. I do not know if this is the start of something larger or just a continuation of the dead cat bounce that started yesterday. I do know that I don't know and therefore I move mostly to cash with a balance of longs and shorts. We need to reassess and reconsider. It's that simple. We didn't get what we were looking for, we ate the shorts and we move on. Wish I had all the answers but anyone who tells you they do is feeding you a line. There's too many dynamics that comprise this market that we trade and it's all about positioning and money and risk management. Sometimes you can be wrong on the positioning. You had better find a way to manage your risk and money otherwise you won't play the game very long.

An extremely frustrating outcome today as we had laid our traps well only to get tangled in them ourselves. Many of our stops have triggered pulling us out of short positions. We got chewed up in the index shorts and those hurt as they are so heavily leveraged. Some days turn out this way and when they do you stick with your methods, not your feelings. We will let the dust settle and reconsider. SPX 1200 is the target now for the close. I sure didn't expect this but the reasoning for setting all those stops earlier today was just in case. Well here is the just in case.

Although we have seen a lot of up and down in the market this morning, those ups and downs were withing reasonably small ranges and the market is pretty dull from an external point of view. Most of our day has been sitting and watching as we wait for an opportunity to do something but are finding it very difficult to do so. Sometimes you are so busy you can barely take a breadth. Other times it's sitting and waiting and keeping your hands off the submit button. Forcing action is not what it means to trade and the definition of forced action is not easily expressed. In general though, if you are making trades with no real risk/reward setup that's favorable, you are forcing action and that forcing usually ends up costing you.

So, we wait, we watch, we ponder and we give the thesis time to fulfill itself. If we get a trade setup back towards the highs of the day on little volume, we'll put another short into play and see if we can catch a late selloff.

The volatility is great and the fact that crude traded down, then back up and now down again seems to be the reason for the volatility to the general markets. I did short some more OIH as we have been fishing there for a good week now looking for a top. Maybe this time.

Having a hard time getting a setup I like to get shorter the NDX or the SPX. If it comes, we'll take it. With that big spike early, we need a little more base trading in here to get a range we can work with to put out another short.

Turns out that the oil inventories simply provided yet another knee jerk higher and forced some short covering. That quickly ran out of steam and we are back in the red again. I'm watching for an opportunity to get shorter the indexes via the e-mini's once more. Tricky trading here this morning as the resistance is heavy and the believers in the ability to rise are many. I think the latter group is wrong near term and am looking to bet heavily against them.

Oil inventories negative for oil giving a bump to stocks. They are back to resistance. Need to watch them carefully for traction short term. A couple stocks stops triggered so far.

I've still maintaining the same views as I've expressed repeatedly the past few days but as our time window narrows, I begin to consider the what if scenarios. To that end, I'm working my way down the list of stocks short and putting full or partial stops in as this morning gave us a higher opening than most are trading. We can put day stops in to capture returns in case this market does rise from here.

Those oil inventories are due up 1 hour into trading which is what I thought, not 3 hours in as I see printed in eco calendar I watch.

We saw a little head fake move higher out of the gate but the chips were the attempted leaders and now that they have shown red, there's nothing really to support the move. I've added a few more short positions with the e-mini NDX and WTFC. Also added to the NTAP short on the early bounce. That's probably it for adds. We are quite heavily short at this juncture.

The biggest eco influence today will be the oil inventories. Looks to be due up 3 hours into trading, but my memory says it comes out 1 hour in. I'll try to confirm a time. That could jolt things when it hits.

Shaping up to be rough start. The chips are catching no real lift early, the Internets are hammered, oil is up, and then the technicals are stacked against an advance of any substance. Buckle up and protect yourself if you haven't already. If you are trading, use the short bias to your trade.

Yesterday we saw the SPX move higher to kiss the underbelly of it's breakdown line. That is somewhat typical in trading where stocks, after a big move one way or the other, come back to touch their previous resistance or support area. As I suggested yesterday, such an occurrence offered a reasonable exit point by the market. Many times the market gives you a second chance ... if you are listening.

I have stated previously that I expect this market to trade lower by end of week. That leaves today and tomorrow. The day is starting with spot crude oil higher again (I still think the oils are ready for a consolidation pullback that should shave 5 to 7% off their current levels as they act very toppy) and the other big story so far is the Internets getting crushed premarket on news that ad revenue slowing. And to think, we took an stop exit on ASKJ yesterday and never got a re-entry. It's down 10% pre-opening.

There is some strength in the chip sector pre-opening though as brokers spread their upgrades.

I believe you have to protect yourself here if you are long or attempt to ride your short positions are even trade a couple more for a quick trade lower. The setup is there and the short side is where we should be concentrating right now. We have the setup and the time on our side for a short trade. That's where I'm concentrating right now.

Some of those most difficult trades are those that are destined for success but that require a lot of nursing along in the meantime. Yesterday the general market began to break down and took out some key technical levels. We have been leaning quite short as a result and continued to lean quite short today again ... heavily short at times. The market, however, is not providing us with the slam dunk trade ... the one where the momentum goes in your favor and doesn't let up. Instead we are seeing a bounce with good breadth but little conviction/volume. Our conviction remains the same but we are tested rather seriously in the meantime and our conviction called to question. Such is the nature of trading ... seldom certain and often questioned.

We end the day still short but, with the SPX moving right up to the breakdown level from yesterday, we of course get to chew on nervousness after the bell and until the next. The technicals tell us we will get a continuation move down and likely before the week is out. That leaves tomorrow or Friday. So we know that our best move is to wait it out yet remain mindful of where we declare our bias as being wrong. So far that hasn't happened. A trade is a function of time, price and volume. Until one of these dynamics change on our short posture which causes us to reconsider, we need to stay with the trade. Have a good night.

The market, failing to break down is seeing a spike into resistance (listed issues) in the past half hour. I'm still remaining patient with the thought that this is a dead cat bounce and little more. Could be wrong but that's the view from here and I'll have to see more than this to change my mind. The NASDAQ continues to struggle and there really isn't big volume in this bounce. Until some of these fundamental things change you have to view this bounce as just that ... a bounce.

Couldn't get a break below the days lows and thus they take them higher. I'm not finding any reason to get bullish here though. Breadth is good but technically there's enough to worry about and another leg down seems to be a higher likelihood than up before the week's out. I did cover one of the two index shorts and am looking to take the other one out as well and stake out a higher place from which to re-enter them.

Market is putting a pretty face on an ugly situation this morning but I would call your attention to the volume or lack thereof in the sector that's moving higher. I don't like the smell of this and put on an additional index short on the SPX a bit ago.

Today is an inverse of yesterday with the financials catching a bounce and technology holding back. The down is not as bad as it was yesterday so judgement withheld so far but I've been lightening up a bit on longs where it makes sense on early strength.

Now that the CPI is out and the other shoe didn't drop futures have found good footing and are ready to rock! Not so quick my friends. We saw a lot of technical damage yesterday and I suspect that the support that failed on 1192 SPX will be some rather serious resistance on the way back up today if we get there.

If you are a trapped long, you might want to consider some scaling out of positions this morning on strength and consider yourself fortunate. I certainly would not be a buyer of any size on almost anything here. I seriously doubt that the bottom of this little leg down has been seen.

Yesterday was an important day in that we saw increased volume on the selling, key technical levels breached and then buried and the recognition that there is real risk in owning equities ... just like we learned in early January.

Although it's too early to do any serious buying, it's never too early to take a look and make some notes. I always make a habit to look at the other side of the trade and prepare. On a day like yesterday, I almost always run through my scan that try to uncover stocks to buy. When the market goes down ... especially like yesterday ... potential future buys are easier to uncover as they stick out like a sore thumb. Outside the natural resources, there are other buys that can be made although they are not in abundance. Take a look at OMC and LAVA for examples. These stocks could warrant some small starter positions soon.

We have the CPI out this morning. Expectations are for a slight rise but with yesterdays selling, there is probably a bias for even a worse than expected number now. If that comes to bear, we may see some knee jerk selling to start the day. I ran my numbers last night and the market is reasonably neutral on the overbought/oversold side of things and heading towards oversold. On the near term support/resistance levels I come up with the following numbers:

Support Resistance
DJIA 10450 10750
SPX 1175 1192
NDX 1475 1504
NASDAQ 1980 2050

Lastly, as I noted yesterday the BKX sold down hard and now finds itself with a broken trendline, a broken neckline on the H&S top and reasonably oversold. On breaks of necklines you often see the market trade around the break for a few days then head in the direction of the break. Not a good sign.

We also saw some further damage done to the transportation index and the utilities are starting to sell down as well. Use to, when the dollar was trampled the market rallied. That's because rates were going down as the dollar sold off. Now rates are going up and the market doesn't move higher on a weaker dollar. This is a change. Changes are important to recognize. Make a note.

Finally, considering everything, some further selling pressure and then a relief pop late week or next week would be the odds on favorite here. As we know, predicting the short term movements can make an old man out of you quickly in addition to the foolishness that you may portray in such an attempt. My bias is just that though ... some continued pressure near term with a little pop mixed in just to keep us honest. Watch the tech sector and the financials as they are still the key tells.

We have talked a lot lately about the risk of an upside failure. We had considered it's happening with a nominal new high on the DJIA and SPX. That didn't come to pass but came mighty close. Today we got the break of the support levels we believe to be key and the next couple of days will like provide a setup to get shorter on the indexes themselves. In the meantime we are quite short a lot of individual issues although we did pick at a few longs even today. I do not believe it is quite time to consider an all out failure and hard pullback as the likely outcome. More likely is the failure followed by another failed bounce. Tops typically are a process, not an event and this one is likely the same.

As I suggested earlier, if you are on the wrong side of this trade, look to protect your capital. If you have been watching what we have been saying and doing the course of this year you are probably not in that boat ... unless of course you didn't believe us. Don't worry, there are plenty of times I have failed to believe and it has cost me as well. Whatever the situation you find yourself in, whether it be good or bad, the desire is to minimize losses and maximize gains. That means we have to constantly monitor our over all bias and our individual positions trimming when it makes sense and alternately adding when the situation dictates. Scaling in and out is the best way to avoid missed opportunities and outsized losses as you can reflect overtime rather than all at once.

Tomorrow we have the CPI bright and early. The precious metals are rallying here and the dollar weakening. Add to that a crude oil spike and if the CPI confirms the pessimism we could see some additional heavy selling to start the day. If that comes to pass, it might be the right time to consider some partial profits. Personally I am going to take a long look tonight on possible next areas of support on the markets in general and stocks in our portfolio in particular. We need to always attempt to be one step ahead of what the market may deal us ... that way we act with reason rather than emotion. Have a good night and see you tomorrow.

Momentum can be the best or worst of friends depending on whether it's working for or against you. Momentum can take rationality out of the equation and can take it out of the equation longer than most would expect or could stand. Earlier I alluded to the expectation that we would stablize around the 1190 SPX area and, though still possible, we have sold off further since that writing. That's momentum at work.

Where you most see momentum work it's magic or, depending on your positioning, it's deadly sins is in the higher beta stocks. Take a look at the Russell 2000 index to see what I mean. It's down the most today and is always a good indication of what momentum can do to you. Since a lot of our stocks are concentrated in this group we constantly monitor this group to keep in touch with what's happening on in the more go-go, fast money group of traders as they often lead the market.

As we head into the close, personally we are having one of our best days of the trading year. We have stalked this market since the beginning of the year positioning, covering, repositioning, etc., waiting for a setup that we could sink our teeth into. You never know when it will come for sure but you do know that if you keep your ear to the ground, remain viligent yet patient, eventually you will catch the easier prey and make up for all those missed hits. That's trading. Stay out of trouble, protect your capital and sooner or later your constant positioning will pay off.

We didn't get any kind of shortable bounce once we moved through the 1190 area. I don't know if we will get much of a bounce to short into. As a result, I keep picking at individual shorts as they break down trying to play on their momentum in the interim. We should see the markets hit an oversold condition by the end of this week, next week at the latest and we should see a move higher as a result. How far we move down in the meantime and how much damage is done will have a lot to do with what that oversold condition provides. As I stated earlier, we have to think of our bias as to the downside finally after letting this market bounce up over the past 3 weeks or so. In the next 3 to 4 weeks, the idea will be to trim short positions as they become to oversold and add to them on rallies. We can also consider continued buys in long positions as they come into support and hold if that occurs simultaneously with a generally oversold market. Note that I view this more of a backburner type trade as you can't risk too large of a position long in this environment. Still two-sided but definitely having lean shorter given the action.

In the very short term, I'm thinking the SPX is likely to drift around this area for a day or so before continuing lower primarily because the DJIA is just hitting it's 50 day MA and will likely hold it today. As always, a lot to consider. Tread carefully but above all protect your capital if you find yourself on the wrong side of this market.

There's no lift here and I really don't like the look of things. 1190 just broke and I'll look to try and short any short term bounce using that 1193 area as a stop out if wrong. The volume has picked up today on this selling and I can't find anything to add optimism.

Today's virtual collapse in the financial sector is really bleeding red on everything. The chip upgrade that got the short covering rally never broadened enough to pull the financials out of their funk. Watch the financials for signs of strength (BKX). From 102 to 98.50 in 4 days was quite a move. If they can catch their footing here the SPX will live to sell off another day. If they continue to break lower they will take out the uptrend line (they are on it right here) and will validate that H&S top we talked about a couple weeks back. This is where the rubber meets the road and is the battle for the remainder of the day.

Our skepticism seems warranted now as the bottom fell out of that short covering rally. The SPX is at it's critical support level. If it breaks and holds that 1192 area we have serious problems. I expect it to try and bounce here in a bit and then we'll see what happens.

What a wacky day. The short covering in the techs have colored the tape and I do believe it's just some short covering still. It can morph into something more but given the bias we have, I'm starting to put some of those shorts back out that we covered earlier ... QCOM, AMGN, MOT, CEGE, WTFC are the ones so far. Also put a small index short out on the NDX. We could get squeezed here and we are cognizant of that possibility but I believe we have seen the highs on this last leg higher that failed and we are slowly putting a top in. Could take another week or two to finalized with some backing and filling but I'm no longer looking for new highs on the listed issues. Now it's a question of the when the NASDAQ wants to fall in line. As such, we should likely trade with a bias to lower prices as we trade back and forth.

The romp in the tech stocks caused me to cover most of my tech shorts. I'm still negative the market but we trade short term here. I do not embrace this move as indicative of a lasting move and will be looking for a place to get short yet again as we ride the ebb and flow.

Chips are turning here and taking the indexes with them. I've covered a few shorts booking the profits.

Other than health related, some China stocks and oils there isn't much strength. I'm eyeing an index short but it's hard to pull the trigger here this early. Volume pretty good as well adding to the negative view.

Market trying to bounce. Consumer confidence lower than expected though so that may make it more difficult. I've been adding a couple shorts and a couple longs but very small changes. Also took out some shorts that were showing strength as they shouldn't in this environment. I've a negative bias but I'm still looking for trades below the support area that stick to give me more confidence in the short scenario from here.

Talk by Korea with regard to diversifying it's currency reserves has put a lot of pressure on the dollar and has shot gold northward and futures the opposite direction. Our decision to try and buy back precious metals at lower prices appears to have backfired and what little we hold is going to make a painful reminder of not buying and holding more. With the only major eco news this week being the CPI tomorrow before the opening, we have to be careful to rush into the metals today based on this event. There may be a need to make a small add in case we continue to run but it's too late to load up for this next leg higher. We need to do that on small pullbacks if this move holds.

Last week we talked of options expiry masking weakness in the market. Although we had desired a nominal new high in the listed issues to short looking back, the nominal new low is looking like all that we may get. Too early to write everything off just yet, but a break of the 1191 area on the SPX that sticks sure would look bad here and given the way the futures are starting out, it doesn't look that far away.

We have been slowly adding to our short positions over the past week and paring our longs. Our stance continues to be cautious and though we are not pressing, we continue to look for downside trades and limited adds at this juncture. Until the market says otherwise the move down appears to have more validity. Key sectors are financials and tech. If 1192 SPX gives and 1504 NDX, it could get ugly rather quickly.

For a day where the markets went basically nowhere, it was a bit of misdirection everywhere. First off, these markets were a lot weaker than they showed. I suspect that options expiry had a lot to do with the masking of the weakness and that weakness was concentrated in techs and financials. Not a good sign.

Second, there continues to be a lack of volume. On options expiration, we have the lowest day of volume on the NASDAQ so far this year. Now, given that it was down, I guess you could say that's good. On the flip side, where's the desire to buy in this market? Even on the listed issues where the indices ended higher, there was no volume. Not as bad as the OTC, but still low.

Third, outside of oil, there just isn't any leadership out there and oil is not really the kind of leader you want. Within the next week or so you definitely are going to see money coming out of those oil stocks and I wonder if it rotates are goes to cash?

Fourth, the interest rates are getting walloped again as inflation fears are fanned and the Fed Head has made it reasonably clear that he's not sure when he'll let up on rate increases.

Fifth, the rest of the world seems to be having slowdown problems in terms of growth. Surely that can't be viewed as good.

Lastly, the book-to-bill ratio was out on the chip sector and it showed badly again.

And if you want to add technicals to the picture, we are hanging on to first support areas, we are mostly overbought at the same time, the internals have floundered of late giving negative divergences, and sentiment is not pointing to a particularly bullish outcome.

Given all of this, I spent the last couple hours today walking through the negative charts I've been accumulating and putting a few more shorts into the mix. Did run across a couple long that I had to take a starter position in to make me keep track of them, but for the most part, we end the day rather short again. I actually was thinking that we might consider to cover a few shorts and get a little flatter but with all the above shaking around in my head, I'll use the index e-mini's to get long exposure next week if needed but will keep the majority of the shorts in place.

Have a great long weekend, keep supporting the site, making money and protecting capital. My best to all of you in the growing community reading these comments. If there's something you want to know in particular feel free to jot me a line or post a message for the benefit of all.

Sometimes the idea may be right but the timing wrong. Sometimes you have a bad idea but the timing works out just right. Sometimes both the idea and the timing are wrong. The latter case is the worst case and you probably need to consider another profession if that fits you. This OIH short is likely the right idea but the timing is just not right. We thought looking at the oil charts that we could get a break in price and we expected that the highs yesterday and subsequent pullback were the signal that we might get some weaker action. The fact that this market is jumpy also tells us we are nearing the top but catching a top or even a bottom is not for the faint of heart. In fact, there are two things that I need to continue to work on to become a better trader at these type of trades. One is that we need to average in to such a position more intelligently rather than going for the bigger position too early. That's a hard thing to master. The second thing is to let a top happen rather than anticipating and catch the second bounce on a daily chart basis rather than intraday. We were doing intraday here.

The general markets are showing a lot of weakness under the covers and that is being masked by the headline indices. That concerns me as I suspect that underlying weakness will show itself next week when the options expiry is out of the way. Again, I regard these current conditions as warranting caution if you are buying stocks.

We are starting to see some erosion here as the support levels are breaking. It could pick up speed but that's really a coin toss with options expiry. I'm not trying to work a short trade on the indexes in other words.

I've pulled most of the gold longs as they can't get traction on the inflation news because it implies even higher rates from the Fed which supports the dollar which has been the real driver behind gold. They should work there way lower where we can buy them again. 420 on the spot is a good target.

This OIH trade has been very hard. It's the inverse of catching a falling knife ... more like trying to catch a helium filled balloon ... to the moon! Seriously, fading momentum is always a hard trade but as I've said before, the fast money is made at the tops and bottoms and this one has the bearings of a top forming. If we can catch it, we should see a rather quick and hard pullback.

The headline indexes are breakeven basically but the internals and underlying health doesn't look to good early. I have put on some trades long and short with GPRO, APPX, TRID on the long side and DELL and UNA short. Looking to add to that oil short as well.

Uh oh. PPI out and core up .8% ... inflation ... oh my. Does this mean the Fed has to hike rates even faster? That's what this market thinks and unless traders change their mind all the sudden (and I don't see why they would) you can throw out the inside day of trading as the SPX is breaking 1200 pre-market. There's a consumer confidence number out shortly after the bell but outside of that there's no other scheduled news to help. With a three day weekend, we could see traders begin to worry a even more. It doesn't take a lot of imagination to remember the selling in early January and how painful that was. You can bet others are thinking the same thing. Should be interesting.

We wake up to see futures higher but that could be temporary as we have PPI numbers out shortly. We additionally have a long weekend (markets closed Monday) and options expiration which always is confusing. Add to all of this, we have a technical setup where we could either see the breakdown or breakup on a shorter term basis. Let me explain.

As we stated yesterday, as long as 1200 holds we are in ok shape (SPX). If it breaks though, that gets a bit worrisome. If 1192 breaks, I believe we have see a double top for now.

On the flip side, as long as we hang in this area and then turn higher again, it was simply a consolidation and those nominal new highs are still quite possible.

So we are stuck in the middle. I believe there to be more risk to the upside than the downside and thus we are positioned more short than long. I do have quite a few of longs on the list this morning to try to work trades (you really should take a look at the Trade Sheets daily. Updated each evening and then again the next morning, it reflects those stocks on the top of our list for longs and shorts in that day's trading. Many times you will see me trade stocks that are on that list. It's my worksheet).

Remember, yesterday I was thinking we get an inside day today (we trade higher than yesterday's low and lower than yesterday's high). I say that because we close right at support and we have a high that was way up there yesterday that we are unlikely to breach. If true, that says we have some chop in the middle today and that's ok as you can make money on chop if you are willing to take small profits. Small profits on a number of positions does add up by the way.

With the 1200 level holding and options expiration next week, it seems unlikely that we will get follow through selling tomorrow. This and the fact that we are still seeing low volume suggests an inside day ... one where you might consider taking the day off.

Today's selling, on the other hand, reminds us that this is a two-sided market and that we cannot blindly work one side or the other just yet. We may still get that nominal new high on the SPX and we may have instead gotten a lower high that sticks ... way too early to tell. In the meantime, it pays to be careful and to go with the flow. That flow has been long since about the 3rd week of January. Until that has clearly changed, we cannot assume it's over. Yes, we can work short term topping action as we did last night and today, but that's a very short term set of trades. So far we haven't nothing definitive to suggest that the move is finished and we cannot assume that's the case.

If you remember back to the postings I made on the Message Board over the past weekend basically saying probable strength

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