The Daily Dose of Trading Comments

Today didn't offer a lot with respect to trades. Our attempts to manage a few index trades pretty much ended up even by end of day. Tomorrow is likely to be different as the employment number will likely stir things up a bit.

As today wore on, I decided (as posted here a bit ago) that it was worth putting a few more issues on our sheets just in case we get that move higher begin. The reasoning is that the downside from here is likely limited near term. If our assumption is correct, then adding a bit more exposure here is worth the risk if in fact we sell off tomorrow because it's likely to be reversed in the next week or so of trading. We can manage that risk with short index trades in the interim.

If, on the other hand, we begin to rally before the market opens tomorrow, then we will have to pay up to play and that's not very enticing. So rather than a big bet, we make a small one with a plan on how to manage it either way.

End of quarter is upon us and it appears we will be down two out of the three months in the quarter but up overall. That's more than we can say for these markets which close the quarter down an average of more than 4% or so. That's comforting but we still need to catch a good month or two of trading to get our percentages higher. Try as we might, it's not always easy and as a trader you realize that sometimes it's that way. You just remind yourself that your methods, over time, do produce good returns and that gives you the confidence to keep plugging away. Keep your chin up and keep working to improve your performance. With patience and hard work, it will occur if your methods and temperament are solid.

I have pointed out previously how the SMH (chips) have setup with a potential inverse head and shoulders bottom. If we are going to get a intermediate term bottom in this area, the chips will have to lead to the upside. I've started a position in that index this afternoon in front of tomorrow as we have a very well defined risk/reward ratio and if tomorrows does get this market moving higher these stocks will, in all likelihood, be leaders in that move. Recognize that we could be wrong here and/or early but these are the kinds of setups where you do what you do as a trader ... take some risk.

I like the way this market has held up today. Could be just hope and tomorrow could dash that hope but it makes me more bullish as a result of the behavior. I've shifted to finding a few small purchases into the close here. The intention is to keep a long positioning into tomorrow but to remain less than 20% or so total exposure. Adding a few small portions of stocks that I would like to track and add to in coming days.

Today has pretty much been an attempt to refrain from doing anything stupid. As the afternoon session approaches, I will continue to carry that idea forward and will naturally result in few if any trades.

We are starting to see the markets whittle away at yesterdays gains. In seems appropriate given what we have talked about already. What I'd like to focus on though is tomorrow. Do we have the possibility of a push higher on tomorrows numbers? In the final post yesterday I considered that the report would need to be just right to work higher. Too hot or too cold would be hurtful to the market. But what if an oversold market gets a big jump then erases much of that rally the following day. Would that put the pessimism at a point where we could actually get a good rally finally?

I know I'm stretching here, but I'm looking for a catalyst to take us higher; to make that right shoulder of the H&S pattern we have talked about. It may be that tomorrows report instead gives us that washout move rather than a rally from which we finally can get a real move higher. Hmm, now that seems to make a bit more sense. Maybe that's what we are setting up for.

The reason for my searching for a thesis is that my longer term overbought/oversold indicators are now reaching a point where they are maximum oversold. If the intermediate term indicators are suggesting that the downside is going to be harder and if the shorter term ones are still more oversold than overbought, what if we get another spike down? That would bring both short term and longer term indicators to levels where going down is going to be much more difficult. There's going to be support. Doesn't mean we have to go up, but it does suggest that it's going to be hard to much more of a whoosh.

So, this thought process makes me want to stay invested but limited in that investment going into tomorrows report. Our stocks are likely to around a 14% to 15% level by end of day most likely. I will not carry index positions into the report. We'll instead attempt to scalping moves to add to our totals. After a couple months of working out a strategy there, we are starting to see some dividends. As for today ... anyones guess. I can't make a judgement because there is enough negatives and positives today. Bias is likely down which is what we have seen already. How much more? My guess would be not that much.

Something wrong with the quotes this morning. They are all over the board. Making it hard to make sense of anything. Hope they clear it up soon.

As we move toward the opening, it appears that some sensibility is coming back to these futures. With oil up $1 a barrel now, the uncertainty of the eco news tomorrow before the bell and after a nice run up yesterday, you would have to really believe to run these prices higher today. Maybe tomorrow, but today seems a stretch. Could happen but not the sure bet I suspect.

Yesterday's continued rally in the face of crude oils big run back up to almost unchanged by the bell was impressive. Although volume didn't really expand, the breadth was good. This morning futures are up early (eco news shortly though) and again we see crude up half a dollar; what gives?

The charts show resistance right here. Will yesterday be viewed as a one day wonder or will we find traction as a result of the oversold condition and bust higher. I hedged my bets at the bell putting a NDX short on and leaving all longs in place. I won't let it run too far as this could finally be a real bounce that has a little lasting power. On the flip side, and there's always a flip side, it could fester and fall quickly. It's all about risk reward and that's always on my mind.

That was a rather impressive showing today with the markets hanging onto an extending their gains in the face of rising crude prices. Oversold gets more oversold until it's oversold enough and nobody cares to sell more. It's then that you get a bounce. The more oversold, the higher the bounce. This bounce carried us right back to resistance give or take a few points and that's the beef. Is it enough to lure additional monies in and get this thing really rocking or is it a one night stand?

Although I had a reasonably long list of charts that I was interested in purchasing, none of them showed much in the way of exuberance/volume. That kept me tentative. With the rising oil prices at the end I became more cautious as well. I'm not convinced that was the last move lower but then again, this market has scraped bottom long enough that even it is deserving of some respite. Tomorrow is end of quarter and today likely benefited from that. Friday is a big employment number and if crude doesn't cry uncle tomorrow this bounce might have some difficultly rising further tomorrow as a result. Friday is a whole other story since inflation is the operative word any more. A strong jobs number would actually work out bad now; a weak one bad as well I suspect. Has to be just right again to satisfy everyone and help the market. We can think about that more tomorrow I suspect.

Despite good reason to turn tail and sell, the market has held up and looks to do so into the close today. The fears were not well founded evidently.

We have had a busy day and as is normally my stance unless I care to hold an index position overnight, I'm about ready to step aside here and leave the rest of the day to others.

At this juncture, the NASDAQ appears to be breaking out of it's steep down trending channel but the SPX still has a ways to go. That leaves a little room for interpretation and I'm not about to declare the down move dead just yet although I remain hopeful that this is the case as we continue to hold long exposure through individual issues. That said, it still seems a bit early to pull the trigger and get bullish here. Let's give this another day or two to play out and see if there is any follow through. Breadth is good today but volume is basically even with yesterday's. A down opening tomorrow with strength the remainder of the day would be a nice way to see it happen.

Oh man, there goes oil again. I'm pulling in my horns a bit here as it's almost even and the perception is that it's drop is the reason for the equity price rise. They may yet give us that late day fade.

The fear of a late day fade is causing a lot of volatility. I'm attempting to use weakness to buy index trades for quick turns. Not planning on holding them but the moves are rather large here and you can use it to buy and sell.

A big break in the price of crude is juicing the indexes again. As we have seen before, this can be fleeting however. I've been trading around the indexes this morning and am currently in the red on the trades but I believe you have to expect a fade from these levels and I'm currently short as a result. We may finally get the chance to trade for a run into the close today and I'm looking forward to see if that develops.

The first pullback was shallow and they are making higher highs intraday. Real test is around 1177 SPX so we could run that far before we even threatened the downtrending channel. I still like the idea of trading from the long side, but finding a low risk entry point is difficult today. Will continue to wait and see if we get an opportunity. Oil inventory numbers due up next at the half hour and that could shake things up.

They opened the markets strong rather than weak and that offers little opportunity unless you want a quick index short. I'm standing aside for now. Let's see how the retrace acts.

As the quarter winds to a painful close we are reminded that many times the market provides strange twists and turns. The DJIA, SPX and RUT are all approaching 4% losses for the year while the NASDAQ is sporting losses of more than 9%. Those numbers are sobering. To be up just about 1% for the year certainly feels good when considering what it could be yet our measure of success is not to just outperform the markets but to actually make money. Up 1% is making money but it sure doesn't pay very many bills.

Maybe we should join ACe down in Barbados with his colorful shorts. Maybe not as our timing would likely be wrong to start sporting our shorts at this juncture. It's far more likely that we get some sort of rally in the next two or three days than it is we get the whoosh lower although we have to continue to be aware of that possibility.

The markets have been caught in a nasty downtrend for 3 weeks now. In the past few days they are starting to bump up against support areas that are likely to hold in this time frame. We have surmised that we might see the 1150-1160 area on the SPX ... we are almost there. The 10350 area on the DJIA is almost in sight. Nasdaq 2000 has come and gone and now 1950 is within reach. These were all targets that we thought might be outside projections. Now they are near and our fear of their failure rises. Always works that way when something goes on longer than you expect. You get to the point where you are frozen into a non-reactive state; your brain shuts down and makes it impossible for you to seize the opportunity.

That doesn't mean you load up here but it does mean you continue to keep your ear to the ground and potentially test the waters. As you have seen, we have made small purchases here and there of late and have been forced out of a few of them with the continued declines, but we recognize jab and stab approach at the jagged edges is what makes sense from our trading perspective. We can use the leveraged instruments to make the larger bets as we continue to slowly position into a few issues that continue to hold up and show promise. When a move higher does catch hold, those issues will reward us ... just as they have in the past.

At the same time, you can't overextend and you have to be flexible as protection of capital comes with a cost ... that is you will not be fully invested when the market goes your direction but, at the same time, you also will not be fully invested while it goes against you. We get fully invested when we see we have a real turn. There's nothing in the cards yet to say it's here but we are getting awfully close. Just stay cool, protect capital and peek and poke. We will catch a nice move in here somewhere.

There is not much good about what is happening today; lower lows. The only good is that it may hurry the end to this selling and cause the lift that everyone has expected but haven't received. In these kinds of markets it's not unusual for the last gasp down to take out those left before you can get the lift. I still maintain that by end of week we will see that happen. Until then, do your best to protect capital and forget the thought of being a hero.

The market has taken a dive since our last post. We actually did make a quick trade for small profits long but pulled it quickly before things started to go south. I'm waiting and watching now. Did pull a couple individual longs as well reducing long exposure until we find some footing again.

Today we have witnessed a weak market that rallies on short covering then wavers at resistance yet again. The past few days have seen selling into the close. That will change at some point and it will be lucrative if you can catch it. There is likely an opportunity to get long again the indexes in the next hour or so as the setup is starting to occur and then we can allow the positions a bit of time to produce as we move towards the close. My bias remains to trade from the long side as I've stated before near term but, as with anything else, time slowly takes that advantage away. For now, the oversold nature of the market offers comfort. If a rally can develop we will get short covering but first the market has to prove that there are enough folks interest to break through the first of several levels of resistance to get anything going. Trade carefully and respect your stops if you are working these trades. I am.

Sometimes this blogger gets bogged down and I'm unable to make real time posts. A couple of earlier posts seem to have been lost. Essentially, what I had said was that I took some e-mini's long on the Russell 2000 for a quick trade when the early retest of the day's lows held. I did catch a decent move and took profits and then it ran even higher. The bias remains for long trades from my perspective. The push higher ran into resistance at the previous highs of the last couple of days. I would expect a retest of those highs be the end of day today and a short covering squeeze if they can break through. Worth watching.

Yesterday we ended the day with the thought that there will come a day soon where the bearish troops test the resolve of those still bullish. Futures this morning show that test is ready to occur as early as today. The recent lows on the SPX came in at 1168.70 and with the futures pointing down over 3 points, we will definitely be scraping the bottom here again.

There are so many cross-currents to consider here. European markets are weak on worries over their economies. Oil has relented of late but interest rates haven't. Today they are down in the early trading. The dollar has been strong but is reversing course again. That could be a bounce or something larger. Way to early to guess on that one. Month end trading is upon us which is typically supporting. The short term oversold nature of the market is still quite oversold but becoming less so with the passage of time. Intermediate term, the markets are also approaching a heavily oversold position. These are definitely pluses for the market. The sentiment numbers are shifting to more bearish than bullish; another signal that the time is coming for a turn. Earnings season is right around the corner and warnings will likely heat up next week in front of those. That's a negative. I could go on, but you get the picture. There's lots of items on both sides of the table and we haven't even thrown in inflation projections and economic reports due out this week that could affect the market's view of them.

Technically, the SPX could trade down to 1150-1155 and bounce from there. That's 20 points from last nights close. So far, the past three trading days have only served to setup a wedge. That wedge can break either way and there's no indication that it's going to break to the upside yet. So you have to continue to respect the potential for the trend down to continue. That's true of the NASDAQ, the DJIA and the Russell.

I will likely be sideline early with no desire to do much of anything. I'll be watching the metals to see if they can lift on a weak dollar as they are at a critical juncture and the majority of our longs positions are located there. Outside of that, I'll wait to see if we can get some sort of intra day setup on the indexes to make a trade there. I'm still not desiring to put much on in the way of long or short positions in individual stocks.

There will come a point where the market action supports a nice move to the upside. It could be the result of several small updates that add up to a nice upside move or it may be a short squeeze type play where the majority of the gains come quickly and disappear just as quickly. In the interim, there's a lot of up and back type action where the market seemingly can't make up it's mind. Today seems to be more of the latter which is a reflection of what happened Wednesday and Thursday of last week. What it amounts to is no real drivers for buying that shows up as late day weakness. We were gaming for a change today but when it became unlikely we exited and took what we had to the bank.

The last few day of trades have been the easier ones as you can easily measure your risk reward points. It will stay that way a while longer if you are trading from the long side because it's still early in the attempt to lift and it's quite clear where you need to exit if things begin to fall apart. Doesn't mean you will make a killing but you can peel off a few points here and there and if they are leveraged points like the e-mini contracts, then you actually make something worthwhile for your efforts. The landscape is jagged at the turns and there will most definitely be a day this week where the bearish troops test the bullish resolve. Wasn't today but it could be tomorrow or the next day. If that test fails and the lows hold, then a move that is a bit more lasting is likely to develop. For now, use the odds that are in your favor and don't' overstay your visit.

This marks 2 days of higher lows on the indexes but it comes in the context of low volume. As such, you can't get too excited about the possibilities just yet. I can assure you that at some point in the near future, these markets will be pressed again on the downside. Whether they break to lower lows or hold and then really begin a bounce that last a week or more will be what we are watching for. Until then, it's nip and tuck; a little here a little there but mostly in cash when the day is done. In other words, you have to be careful here and not hold significant overnight exposure, lest you get burned. I've taken my index profits for the day and moved aside.

After being bludgeoned in later afternoon trading the past couple days, market participants are naturally skittish about holding anything into the last couple hours of trading. We are seeing that reflected in the indexes now. I'm dabbling from the long side but keeping stops tight in case. The afternoon selling will break sooner or later and we will see a late squeeze as a result. I'm trying to catch that move with e-mini's.

I've not done much since the early writings although we did take a little e-mini long as suggested earlier as we look for late afternoon strength rather than weakness this time around. We are nicely in profits on it now and in protect mode in case wrong. Giving most positions a little room to run as I believe we are so oversold (as mentioned earlier) that the odds favor a bounce near term.

I like the way the market is setting up this morning. Looks to me like we could actually get strength into the close versus the incessant selling. Although I've done nothing yet, I'm eying the e-mini's with and idea of trying to make a move for a long trade here at some point this morning.

Breadth holding up but volume wasn't anything special. Dead cat bounce variety. I like the listed issue strength best this morning from a market perspective. Will look to get longer here at some point in the next hour or so.

The early advance is broad and solid. Waiting to see what kind of volume though. I did make a few purchases in ADBE, MFC and adding back APCC from Thursday's sell. It's early; it's Monday so don't go overboard and let's see how the first test back down holds up. Do they buy it and is there some volume behind this push are the questions that need answers here early.

Short term oversold conditions tend to lend support to a market. They may not make it rally, but they make it less likely to continue to plunging. The oversold conditions are solved by prices appreciating or time passing or both.

When short term oversold conditions combined with intermediate term oversold conditions, the likelihood of further declines becomes even less likely. We are reaching that point currently in the markets.

The result is the opportunity to trade to the long side with less concern for a plunge. Realize it doesn't eliminate the concern but it does provide a more than likely situation where long trades work. Given that backdrop, the next question is how healthy will the bounce be when it appears?

That depends on a number of factors but looking at the charts, it's hard to see a recapturing of more than a third or so of the down move. That doesn't provided a lot of room for upside action near term. As a result, that tempers once desire to get aggressively long; suggests that you don't want to work many versus a few issues; and means that if you don't catch a reasonable portion of the move then it likely isn't worth chasing it unless you are scalping mostly.

Given all of this, I believe we are likely to see an up week in trading this week but also believe that this will result in a failed rally that will likely lead to lower lows in the coming weeks. The desire is to work a few trades long and begin adding some short positions on the way up again. The idea charts are retraces that have held major support areas. That's what I've been searching for over the long holiday.

Futures up to start the day as the market looks to recapture the price points it gave up into the close on Wednesday's weak finish. We'll wait to see how the first half hour to hour trades as a market that has closed as weak as this one for as long as this one has is likely to see at least one retest that must fail in order to work higher.

With the end of trading, the market reminded us just how weak it is right now. Both yesterday and today we sported gains early but by the ending bell we were either lower or basically break even. As if we needed a reminder.

My inclination to book any gains while they existed seems to have been a good move for now. I continue to expect that we will see a decent rally at some point, but when the trend is down and the market is grappling for a bottom, there's no need in rushing in to buy and completely throwing caution to the wind. Today was a good set up for rent trades; buy them early and sell them with a bit of time remaining. I suspect we will see the same sort of situation next week. We will of course have to wait to get that read, but for now let's be happy we were able to get some gains and get out with most of those gains.

I ended the day with two purchases in the precious metals. We have reach levels now where they will either begin to bounce or die on the vine. I have carried small positions and today made them larger. We will either get stopped out on price or by time (has to move higher over the next 3 days) or we will get the move we expect. That's how we end it. Have a great long weekend. Get some rest and continue the chant ... patience ... patience ....... patience!

I've pretty much packed in it at this point as it seems most have done on the Street. I've liquidate more stock since I last wrote as I'd rather book gains on a the first small bounce than to assume the bounce will continue and carry the risk. With the index trades you can easily move in and out of the market but it's not so easy with individual stocks with thinner floats.

Personally, I'm happy to pull back near even at this juncture and again near our highs for the year given that the NASDAQ is down 7%, the Russell 2000 down 5+%, the SPX and DJIA over 3%. Sometimes there's lots of money to be made and sometimes you can throw your net and catch too many fish. Many times though, it feels as if there's a whole in that same net. When that's the case, it's baby steps and quick booking of gains.

With oil moving up over a dollar a barrel now, I've gone ahead and taken my last index long trade off the table and booked the gains. We'll stick with a few individual stock longs for now and continue watching to see if we may get a index trade setup in the next half hour or so.

With the long weekend in front of us, it's not a stretch to imagine that energy traders don't want to be short going into the weekend and thus that makes sense. It also makes sense that the short positions were covered to some degree today and that we can't count on a lot from this bounce going forward but, the market has been beaten up pretty good and I wouldn't be surprised to see a little follow through come Monday. Therefore, if we get some heavier selling into the close today, I may venture in and take a position long again on that thought. It would be a smallish trading position though.

Sorry for the lack of posts this morning. I was unexpectedly called away and am just getting back now. As we move toward the afternoon session, the market is finally rewarding our stab and jab type behavior. We've been working the thesis that the markets are oversold and that we would likely get the snapper type rally as a result. Today that thesis is playing out. We thought we might see it yesterday but alas, no dice. So we wait and we continue to position and we rationalize where the risk/reward lies. When it's in your favor you have to make a move. Enough said.

As for where this day ends, there's no guarantee that we get a real rally into the close nor a backing off which has been the norm of late. What I can say is that the market is primed to rally though and I would not at all be surprised if we get a short covering rally into the close. I'm certainly looking for that possibility as not far fetched.

Lastly, you should always remember that knowing when something might happen sometimes doesn't guarantee us of returns, but staying even when things aren't happening is what it's all about. These first three months of trading have been the most difficult starting 3 months in all my years of trading. There are a number of reasons this is true but the one thing that I keep reminding myself and that you have to say over and over to yourself is that as long as I keep plugging away and doing the things that do work, eventually we shall overcome. Panic never leads to paradise just as greed doesn't either. Small sure steps are the way to get somewhere.

We were able to make a few purchases this morning early and have backed off now as we have no intention of chasing this market higher at this juncture. Our portfolio is up to about 38% long with the additions and unless something dramatic happens, we are likely to sit back now and monitor. If we find a good momentum move we may try to work it for a trade.

Sometimes the scribbling of notes in a blog such as this has differing meanings to different folks. I want to try and be clear about what I'm seeing and doing.

I'm seeing an opportunity to put on some long trades again; not because I believe the market has bottomed but because there's a decent possibility that it has traversed far enough that the good stocks have a good risk/reward ... in other words it's more than likely that good stocks will begin to bounce here and bounce better because the general market is unlikely to have the bottom fall out at these levels and this time frame.

I am quite suspect that whatever kind of bounce we see/get will likely be retested and in fact, may be undercut by lower prices over the next couple of weeks in front of earnings news. So, what I'm suggesting is that we make some purchases knowing that we have a favorable environment for a decent bounce in good stocks where the risk of further debilitating declines seemingly less likely. Hopefully that is clear.

What that means is we are not buying to hold but renting to trade.

Yesterday had the feeling of and on review the markings of a washout type trading day. The volume was higher than normal, the internals were bad, new lows expanded to their highest reading yet, etc. Each of the indexes marked positive candlestick patterns as well; patterns that could show a turn if there is any follow through today.

The futures have steadily gained momentum overnight. GE raises profit expectations this morning and that's a big positive. It has been trading with relative strength the past few weeks while the market has sold off.

Given the long weekend, the first hour of trading will likely tell the tale of the tape today. If these early gains hold, look for the melt higher finally for the day trade. I've been busy this morning looking over my long list of long candidates ... stocks with favorable patterns that have pulled back on light volume ... to do some early buying this morning. We'll see if we can catch a little move here finally given the general setup.

And I finally took a good look at the daily's and other momentum indicators yesterday evening. Uh, they look pretty oversold to me as well. Doesn't mean we head higher but it does mean that the odds of a plunge that holds is unlikely right now.

Weak markets have a weak pulse and this one's almost comatose. After being handed every opportunity to make a stand, we saw selling into the close and a week finish. Not exactly taking the bulls by the horn there are they? Very weak internals and a very weak Russell 2000 today killed the strength in the chips, biotechs and big cap financials.

We are still short term oversold and that can be alleviated either through some kind of a bounce or by going nowhere for a while. Which it will be we will find out soon enough but given that setup, quick trades to the long side still hold the best risk/reward for the next few days if you are so inclined ... until we get a decent bounce or time expires.

I'm expecting some real volatility into the last couple hours of trading today. We have oil dropping big today but now to replace it is inflation worries and interest rate rises. So one boogeyman to replace another. We don't have participation by the small caps yet so the fast money is still being careful yet we have chips rallying as money flows to them. Chips typically don't care about higher rates as do many other stocks and that's why the outperformance on the NASDAQ today. I'm looking for a stab down somewhere in here over the next couple of hours to scare out the weaker longs here and then a rally into the close. Perfect scenario considering the darker side of the market and the behavior exhibited so far today.

When you have a reasonably broken market as we have in front of us right now, you don't have to worry about being invested right now because if a real turn is in fact going to happen, there's likely going to be plenty of time for you to add long positions. In fact, holding or adding to positions that are broken in a broken market is not very wise. If the position is showing relative strength then it's a different question, but if it is selling off as hard or harder than the general market, you need to take a deep breadth before you pull the trigger. If you are not making money, you need to have capital preservation as the centerpiece of your strategy.

Market is drifting lower and I would expect that to continue over the next hour or two. It does appear that we are setting up for a short covering move into the close though.

Very choppy trading with the chips being the real leaders and most everything else struggling to maintain. No real push in the small stocks either so we see relative strength in the NASDAQ right now. With an short term oversold market I'm biased to the long side for trades but we could get a flush before that happens. I'm being quite deliberate in my moves here and waiting for a decent setup to move on. I still like the earlier thesis in the first post of the day. So far it's played out as expected.

Well, we got what we wanted with the short covering rally. Now it gets harder. I would expect some drift with a downward bias next and setting up a late day rally on more short covering. We have closed all long index positions now and are simply looking for the next entry point. Took just a small NDX index short position as a hedge earlier that we will look to cover as they come back in.

Lots of early volatility but it looks like short covering in the chips and the financials are stablizing. I've covered shorts and gone long for a trade. Again, these are very short time frames here.

The short term trend has been down and the CPI wasn't friendly showing a bit of an uptick. That's pressuring the futures. We took a little SPX e-mini short in front of the number which quickly turned to profits as a result. Looking to take those profits here in the first hour. There's a good chance for a low to occur in the first hour or so today that could lead to a slow climb higher. For traders, watch for that possibility to unfold. When ACe talks of RSI not oversold, recognize that there are many measures of oversold and there are many time frames. When I'm talking of oversold, I'm talking of a ratio of internal highs/lows and a 10 day moving average. It's a good short term indicator but realize it's a short term indicator. ACe can speak for himself but I suspect he's looking at RSI on a daily chart and that indicator is not oversold on that time frame.

I've been watching the metals of late and waiting to see a change of character there in that inflation supports the precious metals in spite of the higher dollar support. That may in fact be happening finally and that would be the sweet spot for it would say a weak dollar is supportive when it occurs and that a strong dollar is supportive as long as inflation is what's driving the dollar. Watch for that theme to play out here.

CPI number due out in a little bit and the question is will they support they inflation scare that started yesterday with the Fed? If so, look for some faster type selling this morning. This is not a time to be a hero and play for anykind of a bounce. It's the type of market where you want to look for a bounce to add some short exposure. The first bounce is likely to be a weak one and will likely invite more selling when it comes. That is, if it comes reasonably soon. If instead we continue down and get some real panic, then you might see more of a washout type move where they just hang around for a few days and then start to climb.

ACe's observation from Barbados is somewhat reasonable in my opinion. We have seen some fear starting to show but no real fear yet. We are not that far from those early foolish highs we saw. Besides, those with lots of shares to unload don't want it to happen too fast, they still have more to sell. My best guess of what's about to occur is some continued selling this morning and maybe a setup for a spike into end of day that could carry tomorrow for half a day or so and then some resumption selling before the long weekend. I expect us to undercut those lows of February before this leg is done, then get a climb into earnings now that we have sold down. That is likely to be the last real leg higher for a while though. If it unfolds that way, that's the leg up that we can think about actually putting on short positions and holding them. That would be the right shoulder of a large H&S pattern on the SPX. Right shoulder comes in around 1200 to 1210. If we see those prices again, we definitely have to consider it to be one of those opportunities that the market offers only occasionally. Mark that thought down somewhere.

ACe Talking: On the beach:

It got too stressful for me, so I had to leave and chill out for 10 days in Barbados. I packed the essentials: sun tan lotion, trunks, and a bunch of shorts. Not the ones you wear, the ones you stick on all those overvalued shares and indices that are about to do what they always do after a 2-year bull bounce in an 18-year bear market. I always said that Q1 2005 would be the crucial point, and so it is proving to be. Stay short, close your eyes, and wake up in 2007.

Playing for the bounce? Are you nuts? We have had a 50%+ rally which has definitely run out of steam, and you only need to look around you at the rising interest rates and the mass complacency t0 realise that you should be short, and shorter into a rally. You SELL it, don't buy it. I don't care how short-term you want to be, you just need to realise that the GM announcement on March 13th was probably the turning point. It got those funds moving out of the high-risk junk bonds and starting to think about capital loss not gain. But no panic yet. That will come when we drift below 1100 on the S+P. Inflation is not dead. You cannot have this huge jump in commodities, and producers starting to pass on price increases, without an uptick in inflation. Remember, there is no need to give false readings on inflation anymore, as the election is 4 years away. You were warned a couple of months back, when Warren Buffett said that he was seeing price increases in many of his businesses.

So let them bounce. "Bring it on" I say. Oversold? You must be joking. These markets are nowhere near oversold. My RSI readings are far enough off the bottom to leave enough room for a decent dump. The markets can be down 20 days in a row, but if they only drip, they cannot be oversold can they? We need a decent dump. Remember this. When has a market crashed from the top? Never. It drips down a way, then dumps. Carry on dripping!

Back to the beach.
ACe

Brutal! There's really no other way to describe it. For all those waiting and playing for the bounce, the market has a way of handing pain to the many and pleasure to the few; the unexpected when the expected is beckoning. Today was no exception.

What the Fed did today was to push a weak market over the edge for the short term by talking about inflation. In doing so we are making a very oversold market even more oversold and setting up a real snapback rally as a result. It's coming but it will likely come after most who are trying to catch if have long given up. That's the nature of the beast in situations like these.

As a result, we continue to stay mostly in cash. We tried to work some intraday trades and our early gains were erased with the post Fed action. That's the breaks. All in all, by protecting our capital we will be far ahead when the time to make money comes. Until we reach a situation where we catch a good move one way or the other, we'll keep quitely working to make it happen.

It's a hard game we have chosen to play as the swift beating the market sometimes hands out is brutal and without remorse. We were unable to make anything of the further decline and now it's too late to pick on that dead horse so we are left with a market that's even more oversold now than before the Fed meeting and is setting new lows on this leg down.

The time will come for all this negativity to end ... at least for a while but. In fact, the snapper type rally thesis just seems even more possible now given today's results.

All systems were go until the bond market began to tank. That's pulled the markets down here and has left us with the decision to ride it out or step aside. Step aside naturally. We'll turn and ride them down if given a chance.

Kneejerk was up, then the hard sell down. I'm doing some index buying as a result.

Almost time for Fed speak. Watch for the Texas two-step when the speak is spoken. The Texas two-step is where they kneejerk in one direction, then reverse, only to finish in the direction of the original kneejerk. Doesn't always happen and if the word "measured" disappears from the statement all bets are off, but that's what I'd be looking for here for another quick trade into the bell.

In general, they held up well and now that oil is coming in, the indices are getting a little happy. I'd rather being playing this from the long side today in case you are wondering.

A little bottom fishing it seems by market participants today but nothing to aggressive in front of the Fed. We were able to make a few dollars on the early gyrations both ways fading mostly but then taking thos SPX e-mini's once they had a decent break opportunity intraday. I'm expecting that we go flat now until the Fed meets and we are likely done on intraday trades for now as a result.

Looking back to what we talked about this morning, there's an opportunity to get a snapper type rally that really gets rolling once it happens but is likely to be very quickly undone. That's the current thesis we are running with and catching that move with some leveraged e-mini's would be nice. So, we'll keep on the lookout for it.

Given that thesis, I'm unwilling and undersiring of adding any significant positions in individual stocks here since, if that thesis plays out, we will likely lose as much as we gain attempting to get long right now. Not looking to short either until that snapper shows up.

We are seeing some good speculative action in the small caps and that's a big positive that's been missing for a snapper rally setup. I've gone long some e-mini's as a result using the SPX as the vehicle. We could get a little rally develop between now and Fed speak.

I've really done almost nothing buying a small piece of a health care stock and trading the Russell 2000 e-mini short on it's early strength (fading the strength as in the earlier post).

If we look at a 3 day chart, the NDX broke it's support line but the SPX is holding. I expected the opposite today so I'll hold off a bit for another good setup before moving again.

Nice pop out of the gate. We all know the potential for snapper rally exists; but not in front of the Fed. Be careful to chase strength. This is not the market to chase strength. This is a market that you fade extremes. It's not a momentum trading market right now in my opinion.

If you consider the NYSE, the key problem right now is the financials. Whether it's dollar worries, interest rates, or whatever, the financials are broken and that won't be fixed overnight. Unfortunately there doesn't appear to be a good place to expect a bounce from per their charts.

Looking at the OTC issues, the key there has been the chips. The SMH broke down to it's 50 and 200 day MA and then went under it. The close however is right at those averages. If you flip over and look at the $SOX, it too traded down to but broke and closed below those averages. Mixed picture.

When I look at the general picture, I don't see much hope for a sustained rally as a result. What concer

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