The Daily Dose of Trading Comments

Well folks, that brings to an end an interesting first half of the year and it's rather fitting that we actually ended up getting solidly back into the green as the half year came to a close. So it goes ...

I talked in this weekend's Naked Trades article about the change in trend and the need to position for that possibility. We laid out our short term and intermediate term views and in our Trading Thesis we talked about possible targets for the coming move.

Last Friday and again on Monday in this column I began to lay out the thoughts of what to expect from the market short term. Monday's flat day led to the idea of a bounce on Tuesday and Wednesday morning with possible weakness Wednesday afternoon. Today was too hard to call direction but simply to wait out the news and remain short. They sold them down pretty hard once the news was out of the way and we find ourselves staring at charts this evening with the close today pressing up again the lows of Tuesday. Not good if you are or want to be bullish.

Now it could be that we simple are tossing around and building a range here to wallow in for a while or we may be getting ready to put another leg down in. I expect the latter but the former is possible. Although I began pressing against this market today expecting a further push you have to consider that tomorrow is going to be slow and choppy and that the day before and after July 4th are typically good days for the market. For that reason, my real press will come on a break lower, not here. So, at this point I have about 50% of what I want short in place. A break lower and we can add another 1/4 of what is desired.

On the flip side, if the market rallies from here on volume I would likely look to trim short position size and book some gains. At this point we have to play what the market gives us realizing that it's ebb and flow ... not just straight down or up.

Hope you had a good one today. If we can get some follow through in the coming days we will finally get our due. As I've said so many times and repeatedly here recently, we don't get to choose the time and place to receive our pay as traders. We show up everyday ready and with a plan. We work to make money using technical analysis, money management and simply probabilities. We look to put the odds in our favor and when we have a good setup, we do our best to make the most of it. There are typically 3 to 4 swing type trades a year that can pay good profits. Our desire is to catch 2 of them and to not get caught leaning the wrong way (and certainly not staying wrong) on the others. So far this year we have caught zero! I have great confidence in my ability to read the market and to manage my money. When you are not making money you have to be sure you are not losing money ... at least not allowing large losses to accumulate. If you do that, you will make money in the end. When the market chooses to pay you is the market's choice ... not yours. You simply have to be patient, be prepared, and take what it gives when it gives.

I am starting to press on the short positions here on the bounce off the day's lows. I do not believe that the Fed has offered anything of substance to those looking for a finish to the interest rate hikes and today is quarter end. The latter may support us through end of day and it may not. I do not believe the short term outlook appears unfavorable though and now that this news is out, I'll look to press a bit.

I'm just getting back to see that they took them up in anticipation of the Fed and then right back down when the Fed laid out it's hand. Looks like the hopeful were not rewarded and Fed pretty much left things as they were without tipping us off to what might be next. I do not think this helps this market and have made no moves off of it.

The news that inflation is in control is hurting the metals and the small caps continue to garner interest. I'm looking at adding to my shorts but will likely wait to do so.

I've got to hit the road. I did find a couple more adds this morning on the short side adding to the WB short and putting COO back on the sheets as it threatens to breakout of the wedge to the downside. Oh, and I added a bit more NEM long on the early weakness.

Be back in 2 or 3 hours.

The banking index is coming in pretty hard so that alleviates some of the short term worry I was developing. I see most of the stocks I track in that sector coming in off the euphoric opening. Now the issue will be the secondary bounce and how they react intraday.

I can't see much happening one way or the other in front of the Fed. Just expecting some fading type action as the morning progresses. Other than being squeezed out of the BMC short on the earnings report there, I've done absolutely nothing and I doubt that changes until later this afternoon if at all.

Everything seems ok for the trade lower thesis except the BKX. I see it sticking it's head out above the sideways channel bar here this morning and that concerns me. Now it could end up being a reversal by end of day but it's something to keep you eyes on. The merger this morning has the sector juiced.

They early economic news did nothing to bullish bent the futures have to start the day. We essentially are back within a stones throw of the highs of yesterday pre-opening. With the Fed, month end and quarter end window dressing, some more eco news tomorrow and a long 4th of July holiday, there's enough cross currents to snag anyone sporting a very short term view. As a result, I plan to be very inactive today. I'll look for a trade in the futures intraday if presented but I intend to stay mostly short and wait for this to play out.

The real risk is that the current resistance levels do not hold and we see the market move higher to test the final set of resistance numbers. I do not prefer this scenario although I have contingency plans if it occurs which is, of course, to look to make additional short sales. I'd rather not visit that contingency however and will likely look to take some of the sting out of the move with a purchase of the futures as a hedge if we begin to break higher.

My take this morning is a run up this morning then the drift in front of the Fed. Likely not very playable. I'll be on the road later this morning and busy elsewhere right up into the Fed announcement so don't expect a lot of comments before the Fed announcement.

The market obliged the script we sketched with some strength this morning and then the selling into the afternoon. Now it gets a bit more difficult to sketch as the cross currents tomorrow are likely to be plentiful. There will likely be the positioning in the morning in then a flattening into the report followed by the Texas two step that we have so often talked of. Let us consider what the Fed may say and the likely reaction to it.

It's a foregone conclusion that they will raise rates tomorrow. If they raise by 50 basis points or don't raise at all I think both situations are detrimental to equities short term.

If they leave the statement essentially as is, that's likely to be hurtful to prices as well. The only situation I see that could lead to a lift in prices is if they were to say they are through or something to the effect that they are close to through. I could be fooled but I don't expect the latter as a high probability event.

Today I did a few trades, removed the futures short on the DJIA and added a few individual stock shorts on some strength into resistance. (YELL, WB and adding to AMZN). The one long I added I ended up removing as it didn't take off and I really don't want more long exposure outside of metals. There I did double up on CDE having recently cut back there. I tried to do the same with PAAS and NEM but neither allow me the luxury of a buy and watch it sky move so I didn't chase. The metals could break higher here but there's still a decent chance they back fill further.

All in all, as I said last night, I'm tired of waiting for a better setup. This one has all the markings of a high probability intermediate term trend change and I've positioned that way. Yesterday I positioned short most all day on the strength that showed up. Frankly, I was quite surprised that the DJIA carried as far as it did but it was pretty stretched on those two days of selling. The point is, in the past I would have tried to work the one day wonder trade and then get caught holding the bag. This time I'm focused solely on a move lower and catching the bulk of it. In fact, when I feel the time is right, I intend to press it. Hopefully I'll have the wherewithal to press hard and be right as it's been half a year in the coming and I'm really tired of waiting.

I would like to caution though that in trading what can go wrong sometimes will and with some big news events about to unfold, we cannot be overly anxious nor certain so as to remove all doubt of being wrong. No matter what we think, we have to continue to weigh the action against what we think and see that they jive. If not, we have to modify our thesis/thoughts until further data is revealed.

Have a great night and see you tomorrow as it promises to be an interesting day.

The afternoon has brought the weakness I was looking for. With an hour to go I don't expect a melt into the bell but I don't expect any real bounce either. I am not pressing any shorts here in front of the news but am waiting for a confirmation that we really are going to trade lower intermediate term before pressing.

Not a lot of movement in any direction as the market awaits the Fed pretty much. I've tried to be hands off today and pretty inactive. I continue to error on the side of shorting the market for now. Not much to say really. Still expecting to see some weakness into afternoon trading.

If you look ahead to the Fed tomorrow and then more eco news on Friday and a long weekend, it's hard to see this market busting higher today. I expected some strength this morning and more concern setting in as the afternoon approaches. I'm still thinking that scenario could play out.

The oil inventory build has pushed oil down on the knee jerk and if it drops precipitiously that will like putting another spike higher into the equity markets. If it holds at these levels or trades higher, then the equities will feel it. Right now oil is an excuse to take profits or to make a trade higher. Big moves provide the excuse whereas sideways action does nothing.

I'm staying quite short here looking for pressure on the indexes.

The spike down in crude prices on the oil numbers caused a spike up in equities. I do not believe the equity spike will last though and remain with a bearish bent this morning for the intraday move.

Other than one purchase just now in some CHRW (trailing with a stop of 30 points) I've been a net seller this morning putting more shorts into place early. So far yesterday is looking like nothing more than the run of the mill type bounce we thought it might be. Too early for a verdict and oil inventory numbers could cause a move here in a few minutes.

The early bump higher was quickly sold and the early read looks negative this morning. I'm sitting on my hands and waiting.

The sleepy lift higher that started yesterday was fueled by moves pretty much across the board. Up until last week, this latest run higher that occurred since the breakout back in the middle of May had offered little opportunity to get long. If you are of a bullish bent, then this could be viewed as that opportunity ... finally.

Not all longer term moves start out tepidly; but most and yesterday was tepid if considering volume. At the same time, not all tepid moves result in longer term moves. In other words, for this beginning to make itself into something more than just a failed bearish wedge, volume will need to pick up and more than 2/3rds of the decline would need to be recaptured. That would break the key resistance levels I pointed out in last night's piece. Until then, you have to view this bounce rather skeptically and if you are intent on playing the bounce, you had better have your foot positioned near the eject button as the need for speed on the exit could come at any time.

The trend up held all day intraday. We pushed right to resistance and held steady into the close. Problem is that it comes on lighter volume; quite a bit lighter in fact. So we have the first push back up on lighter volume and the question becomes ... how far can they push with less folks in the candy store?

I suggested earlier that today and tomorrow morning offer the opportunity to push and push they did. I started shorting today and will continue tomorrow if prices continue higher. I've waited the better part of a half of year for a situation to setup that we can press into. I believe this is that situation and I believe the press is to the downside. It's pretty cut and dry. Either we are correct and make some serious pennies here or we will be hung out to dry and be quite fried. All you can ask for is the setup.

So, tomorrow look for a potential continuation push in the morning. You have the oil inventory numbers in the morning that could do just about anything to that bubbling crude, the Fed on Thursday and more eco news on Friday not to mention holiday trading into the weekend and then earnings starting to trickle in as well as the second half of the year. Usually the mark ups, if they are to occur happen this week so there's a bevy of cross currents flowing here. Above it all is the charts though and they show resistance on the SPX at the current price points, again at 1205-06 and then the heavier last stand type resistance at 1210-1212. On the DJIA it's resistance at the current price point with heavier resistance at 14450 while on the NASDAQ, 2077 is the number to watch.

I'm focused on the short side right here. Could be wrong and it will be painful if true but the charts sure seem to be lining up for another leg down off of the reversals of last week.

This is a very ordinary looking bounce without much volume and I continue to short into the strength building up some decent size positions. Looking to put about a 1/3 to a 1/2 of desired short size on into the move.

The bounce is in full force today and I'm using the strength to setup swing positions shorts. I've added a couple in the indexes (DIA and just now the IWM) and am looking to scale into short positions over the next few days. In keeping with the running thesis now, we are likely witnessing a bounce, the building of a bearish wedge. That may play out another 10 to 12 points higher on the SPX or it may have already ran towards it's highs 1198 to 1200. Since we don't know, I start scaling in and build to the position on additional strength. It doesn't make sense that today is the only day for a bounce, but that was a wicked fall last week that did significant technical damage to the intermediate term bullish case and thus I'll start the shorts on the strength I'm seeing.

At the same time, intraday, today was the day to try and make the long plays. If you haven't done so already, then it's likely not a good risk/reward play anymore.

It's been a hard trade this morning attempting to fade the strength. They pushed us to our limits and finally began backing off. I've removed the futures trades at small losses only out of discipline. The trade was to be long overnight and liquidate on the run up. There's likely a trade to the long side for the remainder of the day so I'm probing for an entry as a result.

So far, no fade. An hour into trading and they are simply not giving anything back. Has to happen soon or I'm on the wrong side of the trade this morning.

On a slightly longer term basis, I do believe we are seeing the first thrust back up in what should be seen as a bearish wedge. This can carry for a few days and the timing makes it such that this week could provide that wedge to develop.

Nice broad strong gap up advance off the opening bell. I've faded this move (shorted) for a quick trade this morning and have added a couple more swing shorts to the mix on strength (BMC, IVC). The trading is going to be choppy so if you buy and sell the extremes you should have a decent risk/reward setup if you honor your stops.

As I worked through the charts last night, I was struck by how many oil related stocks were on the momentum moves that I scan for. Outside of a few odds and ends it was mostly oil, oil related and more oil related stocks.

We wake up to see that the bounce play looks to be alive and, as one would expect, it happens overnight and out of hours so most will not be allowed to take the low risk entry from yesterday's close. When I look at these charts and I look at the time frame, Thursday and Friday look particularly troubling from the market's perspective. That leaves today and tomorrow as good bounce day candidates. Today's bias is up but you likely cannot buy momentum but instead pullbacks intraday.

As we head higher, I will continue to look for and establish short positions in individual stocks and then the index vehicles. I'll key off the SPX as a measure of how high the bounce is taking us. There is reasonably good resistance now at the 1198-2000 area and then serious resistance at the 1210 area. The DJIA has been the weakest but was the most oversold as of yesterday and is why I worked it for long trades. Same will be true today. The real measure of any advance is participation by the BKX and the SOX/SMH so watch how they behave.

Seems to me that the games are in full force as the fear of a further melt causes the downward spikes when price gets any kind of momentum in that direction. You can be sure that the larger traders recognize this and exacerbate it as well then cover for some quick points. That why we see the jagged trades we are seeing now.

Today the SPX held right at the key 1191 support area. This continues to promote the idea of a tradeable bounce and then some continuation downward. The NASDAQ and, in particular the chips, continued to get shellacked. This confirms the idea of what transpires in terms of a bounce suggests that it will probably be just a bounce. On the flip side, as I suggested in the last couple of posts, there are some thinner stocks getting some wacky moves going and that suggests that the hot traders continue to remain active and haven't given up on the idea of more money to be made on the long side with the thinly traded stocks. I saw GOOG get some attention in this arena as well when it broke topside of $300.

I was able to make a little hay today although it was indeed a challenge. Keep your senses about you this week as it's likely to be choppy and as trading things further that will only get worse.

I'm seeing a spike up in some of the more speculative stocks like CERS which I highlighted earlier. I'm booking a few gains on the spike but that makes me think this market wants to bounce here and I'm holding the DJIA futures long into the bell most likely.

Today has been quite a fishing expedition. Since I last wrote, I've tried 3 stabs at long exposure in the DJIA futures. Stopped out twice, but the third time we hit and are riding that move now. You could tell that unless there were about to fold this boat and take it down hard, that area we were trading at when I last wrote should be the fuse area for a quick explosion higher. Now the question is can they hold and build on the squeeze a bit into the close.

I've not totally abandoned the idea of long exposure here as there's likely a trade in between the negativity bouts. I took some additional CERS long a bit ago making that size larger and actually trying a new position in AXA with a tight stop.

In my opinion, if these markets bounce before resuming their fall, it will come from the levels that are printing currently. I'm looking for long index exposure for a trade as the risk/reward here is interesting.

It's a real struggle to hold support on the SPX at the 1191 area. That last dip down is violating it and unless the bulls find the wherewithall soon, it's going to get even uglier short term. I've pulled my idea of a long bias for now and am simply sitting this out.

The best counter trades come a day or two after the big drop or jump, not immediately. Today, for example, the big bounce is unlikely. It's more likely to come tomorrow or Wednesday. What that means to me, as a trader, is that today is a trade of small amounts. I've been in and out of the YM (DJIA futures) 3 times so far, all long. I'm just scalpling small profits on an index that was racked the last couple days. The risk the next couple days is for a snapper rally after Thursday/Friday stretch. If you can catch it, great. In between you can scalp the extreme position for decent profits.

Market getting some traction. Bias today is higher but you have to be careful as the likelihood of this rally be very short is high and the stabs down will come without warning. As I said earlier, my focus this week is to position in for some swing trade shorts and eventually short the indexes as well.

The bounce is a bit tepid this morning, but a bounce nevertheless. With oil up and chips down, the markets are struggling. The only real buying interest is likely the result of dip buyers and that's not the best of company to keep.

I worked a long bounce trade on the DJIA futures this morning but have taken the bounce play off now and am looking for short plays. I've added 3 to start the day, MBT, PKI, TTC. Looking at others as I intend to build some short positions into any strength this week.

In the month of June our focus was working the long positions and keeping a wary eye on a turn in the market that would signal the need to step aside. That signal finally materialized last week. Our thesis has been updated to reflect this thought and as I suggested over the weekend with the latest Naked Trades article, the time has come to look to the short side of this market for entry.

On the short term basis, the DJIA has sold off rather seriously without so much as a stand at what was significant resistance less than two weeks prior. That tells us that all we had was hollow shouts for higher price points, not real buyers. The give up of 1198 SPX was telling on Friday. I really expected it to hold. Now it becomes intraday resistance with the 1210 area now significant daily resistance.

The high percentage play is to expect the market to at least stabilize or bounce from these levels. Momentum has a way of ruining the higher percentage plays so you shouldn't blindly bank on it. The even higher percentage play is to slowly build some short positions in the coming days as July looks to be a painfully hot month for the longs.

Well, the weekly charts likely turn down today with numbers appearing as they are. I've some business outside of trading that I need to turn to and am out of here. I've done nothing since mid morning and have raised significant cash levels looking to start fresh next week.

Earlier this week I talked of 3 big moves so far this year and that I wanted to catch the next one. Well, we just saw the first leg of that next one transpire and catching the remainder of it now becomes the objective. I believe that we will have the opportunity still since next week is the last week of the quarter and there will be some desire to at least hold things steady into end of quarter. There's also a lot of bulls who got left out on the advance that may look at the charts over the weekend and see better entry points now. We'll have to wait to see how many of them there are though. It's always interesting that everyone wants to buy on a pullback until the pullback occurs; yours truly included. When they snap it down hard though on increased volume, it kind of takes ones appetite away.

Have a great weekend and hope that, if nothing else, you avoided the spill.

Turning out to be another day of disappointment as the push on the SPX has taken out the 1198 area and now is zeroing in on 1191. That tends to confirm the idea of a top being in now so the hard work is to find entry points for intermediate term shorts. Given the ferocity of the pullback, we don't have a good entry point here but instead either need some sideways action or a bearish wedge crawl back higher next week. All in all, yesterday was the day to pour it on and hold them. If there's one thing I've got to get better at is understand the propensity for the chaotic move rather than the average play as that's where the money can be made. The first step to solving a problem is clearly identifying it and that step has been taken. Now that we know what we are after, we can search for the solution.

This slow drip is frustrating if you don't have enough in place to profit by it and worse yet, if you are positioned wrongly. Now if you are at the beach with ACe, then that's another story. Got to get me one of those beach towels!

The market tried to lift but couldn't. It's too soon. I've taken what little profits I had on the long setup and am mostly in cash and waiting. Next week, for a number of reasons, gives us the better setup. What we need to see is these general support levels hold on a closing basis today. That would provide what is needed for next week.

There is nothing simple about trading whether your time frame is years, months, weeks or intraday. Some will say that short term trading is noise. I would say that all trading has too much noise.

The intraday setup has failed and I've been rinsed again, this time for some losses. I do not take large risks and the failure, though it costs us, is like fishing. You probe the waters looking for the right spot and the right lure. When you finally find it, you cast and wait. The idea is to put the risk to reward on your side. Many times it doesn't work out. You cut your losses (or in the case of fishing your wasted time) and look for the next setup.

I'm not quite ready to give up on the bounce idea but it needs to occur pretty quickly here or we are going to have to admit defeat on this try.

The intraday long setup trade is upon us right here on the NDX. I've made the purchase and now need it to stablize and turn. It has a little intraday inverse H&S pattern right now and a move back above the 1513 spot price NDX pivot will get it going.

Intraday we got the rinse move on the NDX which also rinsed me out of the ES long futures position as well. I'm looking for a retest of that rinse now on the NDX and will look to go long there or back on the SPX futures. There's a good chance for a short covering rally at this point in my mind.

There is positive divergence on this lower SPX low and I'm making a purchase on the ES futures as a result. Of course we will need to have a reasonably tight stop but a good risk reward here for a bounce.

I continue to see the fast money exit the markets. You can see it easily through the behavior of the Russell 2000. This tells us the momentum guys are continuing to get hammered and that makes any real lift hard as they are the torch bearers in the early advance moves. Note that they are fickle and more apt to turn on a dime though so if things stablize they could catch a bid.

I was looking to see if the 1198 area would hold on the SPX and the NDX 1508. Both have done so and with another test likely within the hour, if they continue to hold, look for some buying to materialize. I will switch and work the indexes long if that occurs. We should see that soon.

When I wrote earlier about not putting on swing positions, I should have clarified to say swing long positions. I am adding swing short positions this morning like NVDA and PDCO.

I'm looking for some carry through pressure sometime within the first hour and a half this morning but I expect it will find some footing and we could trade back towards the resistance points I pointed out earlier. At this stage, I do not believe it wise to add swing positions as the time frames are too compressed. Next week is usually positive and that could help to stablize the short term selling. Add to it, there are a lot of folks who never got the chance to buy weakness. They will likely want in at some point. All of this makes me think that if we break, it's not today and likely not early next week, but a bit later than that.

As I sifted through the wreckage of yesterday markets here are the standouts.

1. Increased volume on the dive. Not good
2. Breadth negative. Not good
3. The chips led early but reversed and closed red. Not good
4. Oil and precious metals were the only up sectors. Not good
5. The DJIA closed below the 200 day MA. Not good at all
6. The Transports are threatening their 2 year up channel at 3400

I was looking for something that was good and what I came up with was this.

1. This pullback could setup a good case for the next advance once complete. Support on the indexes now are:

SPX 1198, 1191 and then 1170 to 1160
DJIA 10350
NASDAQ 2055 and then 2030

I'm leaning on the short side coming into the day as you can see from the portfolio. They may try to lift them but after that ugly reversal yesterday, I can't see the lift going very far. If today was a one day wonder, then the 1110 SPX, 2100 NASDAQ have to be regained and rather quickly (next couple days). If it doesn't happen I thin ACe might be heading to the beach again.

As for the early morning daily thoughts, we see a repeat with metals and oils higher (note that gold has switched from following the dollar to following oil for now). The beating from yesterday allows for an early bounce but if these other markets hold, look for a quick test of 1198 SPX. A break there and 1191 quickly becomes the target. On the NDX, the bounce may carry as high as 1530 spot price with 1540 being the line in the sand on the upside (long way from the close). If 1508 fails it may get ugly quick as that's the 200 day MA.

I never know what's going to happen but I'm wary when things get too far out of kilter. This market has been been out of kilter for a while and it finally got it's bell rang. The SPX ended up below the 20day MA and that's not particular good for the upside thoughts near term. Same is true of the NASDAQ.

The NDX, which I'm most interested in looks destined to play with the 200 day MA again and the Russell has been begging for a beating and took one today.

Now all is not lost if you are a bull as a healthy dose of skepticism could actually help things here if your time frame is longer than a day or two. In the meantime, if you didn't lighten up you likely gave up some ground today as the beating was fast and furious and once we rolled over it just kept on going.

Personally, I just held my own today and I guess that's not too bad. As always, the market is always ripe with opportunity; you just have to put down your prejudices and consider what is really in front of you. Good night.

It's been a tough day for the bullish camp. They got the break on the NASDAQ they had been looking for but it didn't hold. Now you have some trapped longs up there making it more difficult to move higher on the next time up. That's one of they ways resistance lines form and why they are technically important.

I've thinned out my long holdings quite a bit today and believe it a bit early to remove the short positions. I took the profits on the futures way too early and attempt to catch the bounce play cost me what I had made on the downside. So it goes. I was thinking last might about the cycles the market goes through where it makes sense to play the range for a while but then it comes time where you need to forget the range and concentrate on the higher probability of an event that is more chaotic. Today was the more chaotic case and the bounce play to fade the move was not the play to be made (in other words, working the bounce case was not a good move because the measure of where to buy was skewed and left us buying way too high). This idea fascinates me and I will likely continue to work on it more in the days and months to come because these chaotic events are very quick and very profitable if you can position for them; especially with the leverage of the futures.

What a dump. Call out the doctors as blood work is in fact needed. Sometimes it's all about staying out of trouble and this market looked like trouble today. Look for a quick bounce but some serious pressure into the bell as they are likely to close them on the lows today.

On the intraday trades, a quick whoosh down from here would be a nice risk/reward buy of the NDX futures. I've booked the shorts at this point and am waiting to pounce for a bounce again keeping with the thought of a bounce that fails. If I can't get a good entry then I'll stand aside and simply wait for a re-entry on the short side.

The tone has been changing of late and today's negativity pervades most everything except the chips. If they fold, then look out below because a reversal there would set up a very ugly chart pattern for the indexes.

So what do you think about this market? Internals negative, volume up a tad and the chips short squeezing higher along with oil and precious metals. Looks like a recipe for a sharp reversal unless it broadens.

That's my take for now. I'll look to take some quick profits on that short I entered a bit ago with the thought that they will try to lift this after the lunch hour ... but that likely sets up the best short if it occurs. A reversal today off the chips strength would be a dagger short term in my opinion. The impatient bulls are chomping at the bit and they are setting themselves up for some blood work.

I'm just getting back to see that the NASDAQ and chips are holding well but that there isn't any confirmation elsewhere and the crude oil is attempting to spike to $60. I've just started a short in the NDX as a result because this looks like a vanilla type short squeeze ... nothing more.

Today I will be out of the office for a couple or three hours. I'll monitor from the road but posts are likely to be terse or missing. Yesterday's failed breakout and subsequent trades lower most of the day suggests some backfilling. A pullback on the listed issues to the 1200 area would setup the range trading for the SPX and would be normal. The NASDAQ pullback to 2075 would also be just fine. It could pull back as low as the 2055 area an still look fine. The NDX, however, is more concerning for the OTC as it could turn negative with any trades under 1510. If the other indexes do their thing and remain range bound, 1510 should hold and offer a nice entry point area.

So far it's all about the chips. They are trying to turn this market higher. Lots of cross currents however and I'm not sure they can do it. I'm considering a short on the SPX futures as a result.

As I was working through the numbers and the charts last night, I saw a rather substantial pullback in volume yesterday on the listed issues. That's three days in a row where the volume spike of Friday's options expiration stands in stark contrast to what came before and after. The DJIA composite still shows the H&S top, the transports are stuck in a rut (FDX getting hammered this morning as an example), the XAU is holding it's gap up and the NASDAQ, try as it might, still can't break and hold the 2100 mark. Yesterday's gap up threatened to do the trick but as we know, they faded it right off the get go.

Now I have to say that volume on the NASDAQ is picking up a tad even if the Big Board is in the doldrums. Until the NDX breaks through and holds 1540 though, I don't see the NASDAQ leading us higher.

Digging underneath the majors, the banking index attempting to start a fresh leg up yesterday but fell back. With interest rates falling again, that sector is being helped. If the rates continue to fall, that could give the listed issues the impetus to move through resistance. Use the BKX as a proxy on the NYSE behavior.

On the NASDAQ, it's the SOX/SMH and although they have risen the last couple of days, the volume has been missing. I continue to watch INTC in the sector as a good proxy as well. It too is struggling up here. Moving on the BBH looks to have a failure in its attempt to move to new highs and the speculative Internets (HHH) are struggling.

In a more esoteric read, my list of high fliers (fast moving stocks of late) shows they are being sold down hard. That makes me a bit more nervous as well.

So, what does all this mean? To me it simply means be very careful here. Yes, it is possible that we take out resistance and put another leg up in the books but unless we move sideways to slightly down a bit longer, I don't see that as a probable event. I also see more risk than reward at these levels on the long side. True, the market has momentum and stubborn momentum at that. The risk at higher and higher levels is that the willing buyers finally peter out and the sellers find no bids to hit anymore.

On the flip side, I see less risk continuing to short strength and buy weakness. There will soon come a time that this strategy will carry more risk than reward itself, but it looks to be good for a while longer. If we can continue to get decent reads intraday we can continue to exploit day trades in this manner and we can continue to have confidence to make swing buys and short sells.

Lastly, let me address interest rates head on. That looked like the simple slam dunk to short the TLT a couple days back. Now we have a gap up through the downtrend line and the logic looks rather fuzzy. Unless we see those rates clipped soon that bet looks to be a bad one and we will have to move to contain it.

As I have said many times in many ways, you have to protect your capital at all costs. I know I have failed to make good percentage gains on the public portfolio so far this year as most readers of this site are accustomed to. What I have done is demonstrate how important it is to manage your portfolio though and stay in the game. It doesn't matter if you are playing with hundreds of thousands of dollars are just thousands of dollars; the principal is the same. Don't dig holes that you have to climb out of. Keep your losses in check and try to remain a couple percent from your yearly highs. If you can put together a string of wins, you will start making some new highs. We are in position; the table is set; now we just need to keep reading these tea leaves and catch the next intermediate term advance or decline. I've missed all three moves this year of consequence. It's time we catch one.

It was another churn day where traction was hard to come by ... on either side of the ledger. So far the resistance lines are holding and turning back all attempts to run higher. If the market churns long enough at or near these levels it becomes more likely that it can break higher as the excesses are worked off. Right now the danger level is higher though and thus the more cautious approach I've taken.

Today I flattened out on my index futures shorts and was able to book some small gains there. I'm fairly well split on the long/short ratio standing at about 26% long now and 18% short. The remainder is in cash. The market's stubborness here has us on the fence which is where we should be at this moment in my opinion as it's better to try and work both sides after runs which is what we have recently experienced.

That's it for me tonight. Have a good one and see you in the morning.

I've removed my intraday short exposure booking the gains which was based on my skepticism of the steady rise intraday thought. Prices are simply bouncing around and unless we get some sort of extreme to fade here over the next hour, I'll probably be done intraday.

On the multiday thought, this market can still be argued either way and you can back up those thoughts with various arguments. Until we get a break we likely won't know which side is right but I tend to be leaning to short side still based on the numbers I watch for short term trading thoughts.

So far it is the steady climb. I'm not so sure it ends that way today though and remain skeptical. We do have oil selling down which is a benefit but it just looks very tired up here.

Now that we got the hard fade, the question is do we get the slow rise the rest of the day or is this finally a trend day down. A trend day down requires the chips and the financials to succumb to selling pressure and so far, both are holding. If you caught that hard fade, I would take my profits and see what the rise looks like from here. If you are aggressive you can try to ride the rise using the recent lows. Right now I'd have to say we get the slow rise now. That may change but that looks to be the pattern right now.

Sometimes you just have to trust your gut. No sooner than I wrote the last piece the futures collapsed taking the market with it. If they can't break them out, they will sell them down and that's what we are seeing here. Doesn't help that oil is moving higher again.

Hard to argue against higher prices today but it just doesn't feel right intraday. Internals still positive, right at the point of potential breakout but volume lacking again. My bias is lower and I'm playing it that way intraday. Looking for a short setup entry.

Oil numbers up shortly. I've put some stops in below some long positions and have added a little short exposure.

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