The Daily Dose of Trading Comments

In times like these, where uncertainty is at or near a peak, one has to either scalp the volatility or simply stay in cash. If you are one of those long term investors who doesn't consider the ups and downs because you know that eventually you will be rewarded, then it all doesn't matter anyway. Because I watch the markets reasonably close all day as I do other work, I see the moves more so than the casual observer. I see the Russell leading us higher. I see the dollar getting whacked and the metals reacting to it. I see the bond yields dropping and inverted yield curve becoming a reality. These are not easy times to trade but it's a lot better than the images I see of stranded survivors of Katrina. It's easy to forget sometimes just how fortunate you are.

Had a conversation with the kids last night about how one day can change everything. We see it all the time in video from Middle East, from the devastation of an earthquake, but usually it's over there, not here. To see refugees in New Orleans, a place I visited last summer on my long road trip, it kind of hits home. I'm through commenting for today. The rally we thought could occur is. We are moving towards the top of the channel but there's still a bit more room. I believe it's temporary though and don't believe it's that elusive buying opportunity. I would advise against that strategy unless your time frame is hours, not days. Have a good night, kiss your kids and loved ones. We live day by day and even though we sometimes feel that we have everything under control, we really are more fragile than we think.

This has been a very volatile day in terms of ups and downs intraday although if you pull up a chart of the Russell 2000 you will see a market that made the early dip and then spiked and has pretty much held that spike all day. Now juxtapose that buying against what you see in the the gasoline futures where we are seeing wholesale prices approach $3.00 per gallon ... yes $3.00 WHOLESALE! Will it matter? I'm afraid so. But as always in the markets, the question is not what but when. Time is the final arbitrator with respect to profits or losses.

I continue to hold a short in the NQ (NASDAQ 100 futures) and continue trading long positions in the listed issues as we ebb back and forth. It's not exciting and it's not certain and although the short term seems to be saying higher, you have to realize that the intermediate term is clearly still down. Don't expect the chop to go away anytime soon though. You can curse it our use it. Up to you.

Sometimes I second guess myself about a decision and move I make with respect to taking or exiting positions. One of the things I have always stressed is that you have to have a clear understanding of where you exit a position, right or wrong; most importantly when wrong. The oil shorts of last week or a case in point. The chart setups where there for the short. I even showed one in this column. That all got blown out of the water along with everything else with the Katrina story. I had physical stops in yesterday morning and almost all of them were removed at or near the opening. Looking at those prices now, we would have significant losses had we second guessed and stayed in. Did it hurt to say I was wrong? Not anymore. It used to but after writing here for 4 years, it's gotten a lot easier as I realize that I will be wrong 40+% of the time on individual positions. That's just the way it is! You have to take your losses when they occur and not care that you were wrong. It's not about right or wrong, it's about profits and losses and on the loss side you have to quickly get the heck out of the way when it happens.

The chop continues. New daily highs a little over 30 minutes ago but they are bringing them in rather hard and fast as I type. I'm only trading the indexes today other than a little add to one of the 3 gold positions I held. I'm in no hurry to establish individual stock positions at this time. The only money I've made has been in the futures so far this year and I'll probably concentrate there more and more for a while. You can do essentially the same with the ETFs if you don't want to work the futures markets. On the individual names, I am thinking more and more that I want to forget swing trades so much as to concentrate on finding two or three good names like FNX and trying to get a long term trade established ... one that I can keep for many months. I'm tired of this chop stuff. It's just not worth the effort.

Volume has picked up and internals are actually positive as the market finally finds some footing and threatens to get a short term rally actually underway. Oil can't make up its mind whether the release of strategic reserves matter and gas prices have already signalled that it doesn't matter how much crude you have if you can't refine it. All in all, a lot of chop but the negativity is pretty thick and that could provide the ammunition for a short term rally that takes us to the top of the channel. I'm believe that this is a short term rally within the intermediate term down trend and will trade it as such, not as an intermediate term trend change.

The volatility this morning is high as the markets are clearly torn with emotion. The higher the emotion the more volatility and that is what we are seeing. There's a disconnect between the various price boards now with oil, bonds, the dollar, metals, and equities all moving rather rapidly in both directions. I made one early trade but have backed off now and only trading fades at extremes while staying spread for pushes in either direction.

Two days in a row prices have been rejected at the 1204 area despite all the problems surrounding Katrina and oil, etc. You have to think that the market is trying to setup a short term rally here back to the top of the down trending channel. That's what I'm thinking as I view the early morning futures. I'm hearing oil is pressured due to the release of some of our reserves. That may also contribute to the move.

I've been struggling with connectivity issues today but with less than an hour to go, what I said earlier still holds, believing that yesterday was more than a one day wonder is rather risky. I've been in and out of the indexes today as much as I could scalping mostly intraday. I'm still looking at the SPX and thinking it wants to touch that 200 day MA again before it's done but I also see a positive divergence intraday between the NASDAQ and NYSE and that keeps me in check on taking short overnight exposure seriously.

With the day as volatile as it is, I've tuned off swing trades and am concentrating on short term intraday trades. I took a whooping on the oils and the metals, the only two sector trades I was attempting to work. When I look back at my data for the year, the intraday futures trading is yielding much better results than the swing trades. I guess if you think about it, the chop in this market has been reasonably significant this year and unless you have good sector picking and timing skills, you have been chopped by the chop.

Intraday we are testing the lows of yesterday but to do that, we are already down pretty big on the day. Unless you get a waterfall type sell off into the end of day, it's hard to see these levels fall today. Waterfall events don't come often but they do show up on occasion. For now, it's tread carefully and watch your step in either direction.

I see no positives in this market this morning. The only positive is that the market is becoming stretched to the downside and although yesterday alleviated that a bit, the situation remains. Market breadth is negative and not improving much as oil trades back towards $70. The oil stocks are the only real strength as a group. It's choppy and there are many who want to believe that yesterday was more than a blip but that's a dangerous place to be right now.

I've been without power this morning and have moved to back up facilities. We have gold breaking down sharply and that has me pulling up stakes in the precious metals and taking stop losses. Also taking out the stronger oil stocks that we had shorted. That leaves me mostly in cash.

My first look at this market shows a very negative beginning and yesterday looks like a one day wonder now. I'm having a hard time finding anything green.

Not the best nor the worst of days. Precious metals pretty much gave everything back on dollar strength. That continues to be a disappointment. Oil strength took the profits away from our shorts and they didn't end nearly as weak as desired leaving those trades success probability in doubt. I even had to lift half of VLO on strength in the last hour. We didn't catch the strength in the indexes either as they gapped over our entry price and never came back in. So, all in all, it was one of those days.

I'm really kind of amazed at how traders continue to jump on catastrophe news and buy. They have been conditioned well. I believe that soon this buy the dip trade is going to backfire and the dipsters will get burned, but hey, it's printing coin right now so they keep doing it.

By tomorrow we will likely see a deeper understanding of the effects of Katrina and how those effects will play out in the market. Today was an up and down day for the obvious effects based on uncertainty. As the uncertainty is removed, we should see trends either reestablish or be rejected. Our job is to determine as quickly as we can which it will be an either lift our positions, hold them or even press them further if it makes sense. Until then ...

Despite my views on the day, I've done very little. I was unable to get a trade off on the gap up to new highs today and was unable to get a favorable entry after that so I have done nothing. Today is mostly research and monitor. As more data comes out about the damage we should see continued pressures applied to the market either up or down so no real reason to take big bets from a swing trade perspective in either direction right here.

They did break the indexes topside and I'm looking for an entry point. The market jumped right over my stop limit entry order and hasn't come back in yet. We'll see if I can get an entry. I suspect we will still have another crack at it in the coming hour or so.

It's always interesting that the market has a habit of making a turn when the negativity or the enthusiasm becomes a bit too much. Of course, how much negativity is enough to force the turn is an open question but if you think back at just recent events like the London bombings these turns come at points where you would naturally think otherwise. The self fulfilling follow through generated from these gap down openings that come after continued declines is become common place in this era of investing. I wouldn't look for the same kind of follow through off the Katrina bounce that we got off of London though.

Other than the early cover of some short positions, I've done a lot of nothing again today. They did fade the opening hard but the NASDAQ, which was leading the charge, ran into trouble when it kissed the underside of the 50 day MA and that stopped everything. If it breaks topside of the highs for today, look for it to run a bit as short covering will kick in.

The oil stock shorts I have on are coming back in. It's taken all morning, but it appears holding steady was the right move. One never knows for sure in a situation like today but if this move continues to the downside today that will reinforce the probability on the trades as you have gap up reversals on all of them.

Metals are holding in despite the dollar strength so there I wait as well. I'm spending the day looking at short setups to come as any bounce from here likely sets up some more of these. As for today, the bias is higher as is obvious by now, and I'll try to buy the breakout on the NDX if it can take out todays early highs.

I've booked some of my shorts outside of oil this morning as the market is finding it's footing. Just taking some profits there. Dollar is strengthening and that's likely not good for the gold shares short term. Oil coming in further as it's up only 3 1/2% now. This is starting to look like the exhaustion gap possibility that I talked about last night with a colleague who is short some options.

This market is not out of the woods by any means with respect to the intermediate term trend as that is definitely down, but a reversal higher here suggests that maybe it's come a little too fast and that some folks are thinking that some money can still be made on the long side. Hope they have their time frames set to short term trades and they have put their stops in. I don't expect a big rally out of this area that has any lasting power in terms of weeks; maybe a few days at most.

Market weathering this storm well as the futures continued to improve and now, with the opening behind us, the selling wave did not materialize. I'm not trying to day trade this push higher but I wouldn't say it is unexpected as the cash market on the SPX held at the 200 day MA and that is the impetus here in my opinion.

Gold is finally catching a more serious bid and last weeks attempt to turn higher and follow through on the intermediate term trend is still in progress.

Oil futures still up 4.5% but that's down from the 6+% overnight. Oil stocks gapped up but are coming back in so there I'm monitoring and waiting with the shorts I have out. As the storm plays out this morning on the Louisiana coastline, more news fragments will come in so there is the likelihood of choppy trading with spikes either way.

The pressure on the equity futures has eased quite a bit from last night when they were all down over a percent. Oil is up big still but down over a dollar from the highs seen last night. OPEC talks of raising the quota again. Oil stocks are bid way up this morning and the question is, will they take a fade after the bell. My thinking is that they do and I'll give them some time to do so but, as always, we have to keep capital preservation in mind as we approach the market so a lot of what we do will depend on how the stocks react given their chart patterns. If they start pressing to new highs, I won't be standing around waiting very long.

This is typically a slow week in front of the last major summer holiday. The charts are technically weak here but the 200 day moving averages were touched in the spot market last night and held on the SPX. We are likely to see early pressure continue but given what has come to this market recently, I don't expect the market to buckle and roll over completely. More likely it will bounce instead so it's late in the game to be pressing your short bets. Preserving capital should be foremost on your mind.

I write late tonight as I've been trading the futures a bit this evening. Oil is up some 6% in the late trading and the equity futures are sucking air. I've been buying equity weakness for scalp trades and shorting oil with the same idea on surges around the $70 mark. As tomorrow draws near, my study of the charts this weekend had me thinking that the next bounce is likely to come in around the 200 day moving averages and with tonights depressed futures, that target could be reached in the morning. If oil holds these prices (Katrina isn't expected to hit until early morning and damage not quite accessible until a bit later), then the early morning trade might be to fade the weakness for a bounce and, of course, short the oils on strength. My expectation is the oil surge will be the exhaustion gap for this intermediate term leg up. For the equities, the spike down that cleans things out and provides the argument to buy. We have been winding the rubber band of late and a sharp sell off could easily reverse if price holds around those 200 day moving averages and result in a sharp rebound.

Enough for tonight. We'll take a look at this puppy in the morning.

The wrap this afternoon is brief. The market continued the downdraft and most of the targets we outline at the beginning of this month have now been met and now those we updated with last week have also been met. So, at this point we need to take a look at what probable downside is left in this intermediate term trend sell off.

I received a rather sarcastic email this afternoon ... every now and then I get one ... talking about how clueless I am in my trading. Interesting email indeed. It was titled fish food and I supposedly was the food. I guess I would ask all of you out there, is there value in the intraday writings, the bias for the day or is just the swing trades that have interest to the majority? Since I live the intraday trades, I tend to write about what I see but I try to be careful to talk about the time frames so as not to confuse. Now this email could just be an outlier or maybe it's a reflection of something more. Just curious.

Anyway, we have a weak market on our hands, and though there will be a bounce in here somewhere, I would be careful to try and find it. Many times these selling spurts last longer than you would think. If you are making money or simply keep your stash in cash at this point, then you are doing well. It's those that buy and hold or sell and walkaway that are at risk. Maybe that kind of frustration was bothering that email writer late today.

Have a great weekend and see you next week. I'll likely be updating the trading thesis soon so keep an eye out. A good look at the charts this weekend may cause such an event.

My schedule has been hectic today with activities outside of trading and thus the absence of posts. The market looks to have found some sort of bottom here and is starting to trade up on that notion. I thought we could get a short covering rally at some point and this may be the start of it but I'm not able to do anything with it given my inability to monitor positions closely into the close.

Oil taking a hit finally and that is further pressuring those oil stock shorts we took on. The metals, on the other hand are really struggling still. I've been extremely inactive today but the portfolio is doing OK so what can I say.

It's been an interesting opening today with a quick move lower and the inability to lift much off that opening punch. What's most remarkable is the pressure they are applying to the Russell as it's down 1.25% already and that says the fast money has already folded shop for the day.

I don't see hardly any lift in the financials or the tech sector and without those this market is in for an even longer day.

It also happens to be the first day is quite some time that I've been unable or unwilling to put on a single trade. The metals are finally getting a little lift and whether it's just an oversold rally or something more about to take place we have to wait to see. On the oil front, it's holding unchanged but the sector is under pressure which is what we started shorting it for. Then there's the miscellaneous shorts that are doing OK as well. That leaves the index trades and I haven't been able to find an entry point I like and thus I've just stayed away.

The bias is down today and I'll continue to monitor for an entry point to exploit that notion but for now I'm without a trade in that arena.

It doesn't feel like there's any light at the end of this down tunnel but be careful as this is the best time to juice things and get a short covering rally to develop quickly. If they give us a good spike, that would be an opportune time to work a few shorts end once the climax point arrives. For now I'm just hanging out, monitoring and doing a lot of sitting on my hands.

Well it didn't take long to see if the small ledge this market was standing on would hold or not. They have already undercut it. Bias is down as a result and I'm stalking to work the momentum in that direction when the time looks ripe.

Yesterday was a slow bounce day for the markets and today brings the end of a tough week for them as well. Today's direction will pivot on whether or not the small ledge this market is standing on is undercut early. If it holds and the market doesn't begin another fall, look for the boys on the street to take them higher and to push those short to cover.

Today didn't offer a lot although we were able to make a few trades in the indexes for some nice day profits. Problem with this market now is that you had another larger volume push down and now a day of consolidation. What usually follows is either a break and continuation down which we should see tomorrow, or some sort of light volume push higher because they didn't break them down. I'll be watching out for the latter tomorrow because that would setup another potential entry on the short side.

Have a good evening and I'll see you in the morning.

Not a lot to say ... a small bounce on anemic volume kind of says it all. I'll check back in after the bell.

As the market settles in for the last couple hours of trading, crude oil is heading up again and that doesn't really bode that well for the general market as it's paying attention to the price at the pump again. Todays general lack of direction and meaningless action is just that, pretty meaningless. The afternoon selling has been pretty much a staple of late but that usually comes about because they have been selling the early strength. There isn't much early strength today so who knows how they end them. All I know is that I'm not willing to do much unless we get a spike higher in which case I'll fade them.

I've been flipping through a number of charts today and have staked out a reasonably sized position in a set of shorts on oil plays. I also worked through all my candidates of short possibilities outside of the energy plays and added some of them as well. AZO, AMFI, CCBI are some names that I find interesting. I also continue to add and remove existing positions as I scale in and out of positions depending on how they are trading. All in all, a lot of work for a little gain so far. The two larger plays on my books are the metals long and the oils short. Both seem to be at their apex and ready to turn. Like always in the market, I'm sure I'll get the dunce cap or the feather for my cap soon.

I've added a few more oils to the list of shorts and have taken positions in them this morning. The added names are CHK, COG and EPX. As noted earlier I've added to the COP and VLO shorts and this is probably my fill in this sector.

The attached chart is typical of all of them.

New highs, a retrace and a push back higher on lower volume. The thought is that they don't have the juice to push to new highs and we get a lower low which turns the intermediate term picture as bearish. So I'm taking short positions in them with stops placed at points where I believe I'm wrong if they rise that high.

Overall the market is lethargic. I've taken a short position once more in the DJIA futures for another trade as it inches higher this morning.

I don't think we can carry a bias today as the trade can take this either way here. What I'm doing at this juncture is looking over the charts, making a few short sells in the energy area for some short term trades, and waiting on the market to make a move either way of size and then look to fade that move. I was able to get a couple early trades in on the short side with the DJIA futures, but am waiting now for some stretch move. I would prefer that move to be up as buying weakness is going to be a lot harder.

Yesterday I began shorting a couple of the high flayer oil stocks which look to have a topping pattern in place. With all the buzz that oil is going to $100 again and everyone agreeing, just seems appropriate to consider the other side of that trade. COP and VLO were the two I chose primarily based on their particular chart pattern, but there are others and I'm looking them over this morning to see what more I might want to do in this direction. Note I added to the COP short this morning.

We have a tepid bounce this morning but you have to remember that they can get a quick short squeeze going at a moments notice so don't get too comfortable on the short side if you are over extended in that direction. Last thing you want is to get squeezed out of a good position.

Bias is mixed this morning. The rising volume yesterday could lead to a pivot day today or it could simply get extended. Early take is mixed with no clear signals being flashed yet.

They finally gave us the break yesterday with some sense of confirmation as the 50 day moving averages all became history. It came on increased volume but the internals were surprising good considering price action. It was the first day in a while that I can remember a little panic type selling occurring. The fact that we saw a minute amount of panic suggests a bounce this morning but don't expect it to hold. It will be sold most likely as now it's clear there are profits to protect and losses to cut. Folks that bought that 4 week topping action are mired in losses now and the majority are probably still hanging on. It takes a while for them to give up. Then there are those that bought in April and May that are now seeing their profits erode. How much do they give back? Hard decisions.

Patient ACe has been waiting for this topping action to play out and not once has he flinched. I've been calling for caution and bearish bias since the beginning of this month. It doesn't pay to buy and go away as they will round trip you for all you made.

Now it likely won't play out in a straight line, it seldom does. There will probably be the back and forth action that teeters and teases one into thinking that the turn is just around the corner. In my work, the corner is a ways off and it doesn't make a lot of sense to expect it around the next bend. Bias is lower and though we will get the push higher that causes short covering, you need more than a short covering rally to get something going. They have tried that for more than a week now with yesterday being the latest attempt ...

After a day of early strength and another fade this time we faded with gusto and it looks like route is on. Volume expanded, fear began to creep in and there was no let up after the bell. I'm a little disappointed that I didn't grab some of the shorts on the way down but these events have a way of unfolding quickly and today indeed was quick. I didn't try to momentum play when I wrote of the three options and instead was looking for a little bounce for a better entry. After that post, there was no bounce and it was down and out.

I dumped all my longs outside the metals and will have to start trimming there soon if they don't perk up. The metals bled all over my books today and other even with the good index trades we made early and the few shorts we have on the books, we didn't have enough firepower to stem those losses.

Hold your noses because I have a feeling this is going to get uglier before the skies clear.

Stick a fork in it as the market confirms the break on all the indexes. I'm frustrated that I didn't get short in front of this collapse but am still probing for an entry. That and the heavy selling in the metals makes what was a good day into a bad one. A lot of frustration as I was oh so close having shorts twice today on the Russell and unable to hold them. Close doesn't matter in this game.

Oil's surge and the inability for the financials to catch a bid throughout this mornings rally past a cloud on the advance. I was unable to get my short in place and am still looking for an entry on that side of the ledger. I preferred the SPX for the reasons above but didn't take the plunge when I had the chance at much higher prices. Now it's a question of catching some sort of late day bounce to short, trying a momentum trade or simply waiting.

Well, we have reached my target for the day and I've taken my NDX long off the table and am looking to short the SPX at these levels. The assumption is that the strength we have witnessed today is the result primarily of short covering. With us pushing higher and higher, the desire to put new money to work becomes less unless we cross critical thresholds. Rather than cross them, we have instead pressed right into the more significant resistance areas without much of a break. Suggests some profit taking could start up here and some renewed shorting could begin to take place. I don't expect a collapse but late day weakness has been a hallmark of this market of late so who knows.

When I look at the charts, I see some reasonably significant resistance about 10 points higher on the NDX at 1590 or so which equates to about 2165 on the NASDAQ. On the SPX, that 1222 area is the first problem which is where we stopped this morning, but if they can breach it, the 1129 area should be the target once more.

With the way the market behaved this morning and since, it appears that this was more of a short covering rally than anything else. I still don't see any strength in the financials and the tech sector was the impetus for the move (read short covering). Thus, I feel we have more to go over today and tomorrow potentially, but if and when we move up to the above areas I'll be looking to turn around again.

On another front, the metals are a big disappointment here. They are getting very close to breaching some areas that would concern me. I've not yet bailed on anything but they are under the microscope at this point. If they were to perk up and show some strength we could add that last round of buys. For now I'm holding off and observing.

Take them higher they indeed did do as a solid short covering rally developed. Now it gets more interesting as the short covering rallies of late have faded badly as the day wears on. I'm going to be studying the charts and seeing what it would take for this rally to actually developed into something more than a morning push. For now I'm holding my bias long for the day but I am hedging at the extremes using the SPX for the short to try and capture a little extra.

Once again we are seeing positive divergences in the indexes with the DJIA setting lower lows but the SPX and NDX not. We are not out of the woods yet, but there seems to be a bit under the market and I'm sticking with the bounce idea.

We awake to find the market hurting with a bit of a smell to it today. All is not lost and a good down opening may provide the flush that allows the short term lift but it could also provide a more serious flush than we expected (yesterday evening) as well. So, we have to keep our eyes on things. If yesterdays lows buckle under on the SPX and DJIA and the NDX confirms, then we are too early on the bounce thought and a more serious drop is likely in store first despite the oversold condition. That's where that stands.

Yesterday I was fooled by the ferocity in the decline and today I'm disappointed by the lack of ferocity in the push higher at the end of the day. I actually thought that we could get a little short squeeze going into the bell but it failed to materialize and instead the late day fade came on again. We did get that push I was looking for though and I actually held a small index long into the bell but it's feeble so far. With this sort of market you can't get too excited by the possibility but instead the actuality. If we can't get anything going tomorrow I doubt I'll stick around for very long on the long side. Despite all this caution, I actually did like what I saw today and I think there's more than an even chance that we will catch a little bounce here if nothing more.

We had a good day overall with the FNX but were disappointed with the broader metals group. They need to find their footing fairly soon or we have to seriously consider what we are doing with them.

See you tomorrow.

Following up on that last post about timing and making calls in the market. I am of the opinion that many commentators use two crutches when making calls. The first is the time frame. If you leave the time frame reasonably vague then you can call yourself a success when you are nothing more than one who, shall we say, stretches the truth. Because the market oscillates, most of the time you can say you made the correct call but as I've said many times before, forecasting is easy compared to actually trading.

The second ruse that is commonly used is to talk out of both sides of your mouth, "If the market does this then that but if it does that then this". You know what I'm referring to. Heck, if you are going to make a call, make a call! I make them all the time and like anyone, sometimes I'm right, sometimes I'm wrong. Historically I'm right more than wrong but like I keep saying, it doesn't matter. All that matters is if you can bring the bacon home when the day is done.

That call earlier is working like a charm here. The bulls got a little squeeze going and now it has the potential to turn into a big squeeze. Price has improved and breadth is almost even. Unlike the last week or so, look for this squeeze to probably carry into the end of day and if it begins to appear that it won't falter, look for the squeeze to potentially accelerate a bit as some of the shorts are going to worry that they have to cover and cover now.

A lot of times it's hard to follow those who comment on the market because your time frame and the commentators time frame is different. For example, I'm trying to work a day or two or maybe three trade back to the bullish side of the ledger yet I'm fairly pessimistic on this market in the two to three week time frame. Many time commentators do not make it clear what time frame they are talking about which leads to confusion. I try, as best I can, to reflect the time frame I'm considering when I make calls on the market because without timing and a sense of how long a trade should last, you are blowing in the wind.

As for the end of day, I've a bullish bias as I'm looking for a short squeeze to develop. That positive divergence on the NASDAQ gives us the bias into end of day and the way they have traded here in the last hour or so truly looks like it's developing. I've covered all my index shorts and am looking to get long ... in the NDX.

One more quick note before you get too short here, the NDX did not show a lower low but instead a higher one and relative to the SPX, that's a positive divergence. Unless the NDX breaks lower, you can't trust this move lower just yet. I've just bought some NDX with a tight stop for a bounce trade as a result.

Like Candid Camera, when you least expect it, you get it. The break of the recent support levels and the 50 day MA for the SPX is starting to make these charts look a bit worse off. This could very well lead to a short term capitulation type low being put in. So far there's not much of a bounce off the lows of a short while ago and I'm sure there are some folks other than myself licking their chops on the idea of shorting any strength that may arise in the coming hour or two for a quick trade into the close.

The hard part about getting too aggressive at this point is that we have been declining now for about 3 weeks without so much as one lift. That continues to setup a better bounce opportunity. As a result, if you too are licking your chops; if you do sink your teeth into a short and get that juicy profit, don't let it get away!

I've taken a few profits on short positions. The inability to break down concerns me from a short term trading point of view and we could see a bounce develop. I'm just trading back and forth today and am booking some of the gains that have came our way.

Oil is initially trading down on the inventory reports. We have seen this movie many times before and it has a way of changing after the knee jerk response so don't overly anticipate.

Tech is strong and financials weak so you have relative strength in the NASDAQ against the NYSE. It looks like another one of those tug of war days. That initial selling was met with buying down near recent lows and now they are trying to see if they can test the recent topside of the range. I have no bias today.

Nice surprise this morning with our FNX stock as it gaps up some 15% on the opening. Looks like their continued drilling is confirming higher reserve deposits. I've sold a third on this opening pop and will look to add back on intraday weakness if it occurs.

General market has decided that these strong mornings just lead to weak afternoons so they are trying the weak morning approach today. Unless they break the MA though, it doesn't mean much.

Despite red across the pond, U.S. stock futures look to open about flat. Yesterday's melt once more on light volume does nothing for the charts other than to say that the current concensus of selling any strength remains. There looks to be a positive tone to the Internetk biotech and chips early and that could lead to another early rally developing shortly after the bell. The 50 day moving averages continue to hold with the Russell under it and the rest above. Until that changes for the better or worse, the markets fell mired in mud here. Selling strength and buying weakness in this tight range has been working lately but I get the feeling that something bigger is brewing as the time frames suggest a change.

Just as sure as we know the intermediate term trend is down, we know that they will bounce this thing somewhere. We were prepared for the bounce this morning but it appears we gave the market to much credit as that early bounce came on really light volume. With this selling the volume has increased and that raises the possibility that what we may finally see is some sort of capitulation type selling take place this week that will give way to a relief rally. What I would be careful not to do is to assume it will happen soon, like later today or tomorrow. More likely it will come in days not hours now but we should nevertheless recognize that there will be a relief rally and that we can't get too comfortable with our short positions over the longer time frame.

ACe writes that we should expect a 20% correction. 20% from that 1240 SPX high area would measure back to 980 or so and that's a long way down from here. I'm not willing to consider that likely at this juncture. I'm much more interested in seeing if we can retest that up trend line that currently comes in around 1180 and then we can consider what more is in store.

As I type the market is trying to rebound a bit from heavier selling into the 50 day moving averages once more. The building of a bearish intraday wedge would provide for further distribution into the close. I'll see if it develops and will look back to the weak link NDX futures to try and ride it down further if it looks to be happening.

Right now it looks like I gave this market just way too much credit in being able to rise a bit more. That early strength was faded rather quickly and we are back to unchanged almost. Maybe they can bounce them from here but that kind of a quick drop back after sustained weakness for a couple weeks now is rather demoralizing if you are looking to put money to work on the long side. Bears have taken control intraday and now it's in their hands to see if they can break this market down further.

We are entering into the quieter period now after the big push at the opening and then the drift. Lately the drift has continued all day and weakness was prevalent into end of day trading. I'm sure that is on the minds of the traders but given the oversold condition and the breadth today, I think you could see the opposite effect where they actually get a short squeeze going rather than a give up.

At this point we are basically looking at trading noise on an intraday basis; just some back and forth action with little larger term consequences. I'm hedged at the moment on my index trades, have added no individual longs other than a starter position in EFJI which is an interesting long chart and haven't really sold anything other than some day trades with the indexes. I'm looking for at least a push back toward the highs of the day and then we will see if they can break them higher with a short squeeze.

The price increase in the market is rather sticky this morning as the retrace is offering little. As I look at the intraday charts, they are definitely looking to carry this advance a little further so I've ended up hedging my positions again as I await the next turn in the day of trade.

The advance this morning has good breadth with most sectors in the green and a 3:1 AD line. After holding the moving averages, the markets look primed to work the upside a bit today so we'll have to be patient in how we attack the short side so as not to get hurt.

The metals are getting a bit of a relief rally as well am our adds all last week are turning positive finally. Given that a bit of room as well.

Looks to me like the volume is particularly light on this mornings push higher. I took a hedge long using the DJIA index to offset the losing position in the SPX but have taken those quick profits and now am shorting this advance at the 1126 level on the SPX as light volume and a big early spike don't add up to a further move higher here in the next half hour.

One of the things that I constantly talk about, whether it be for intraday trades or for swing trades is that it's all about risk and reward because you never know for sure what will happen. Consider that we have a 1/2 percent advance this morning on light volume into resistance. That seems to me a good shorting (fading) opportunity that you can stick out there for a quick trade that, if it doesn't work, you pull rather quickly. If it does work, you catch a quick retrace for a few points and then look to see how things play out.

To the start the week last week I was concerned about the potential for a rally to develop. Monday showed strength but then Tuesday turned down hard and with options expiration looming we drifted into the end of the week. Now we see the short term oversold condition continuing to stare us in the face and futures are up rather sharply this morning.

Now I'm not in the mindset to think that we are through with this pullback yet, but we did hold the 50 day MA on all but the Russell 2K last week and now with a reasonably light Eco week and earnings pretty much done, I don't see a lot on the horizon to keep us from attempting that rally I considered possible last week.

Thus, we have to tilt our hats a bit and consider the possibility that in order to go down, we might still go up. That 1230 SPX area looks like a possibility if they can break through the recent ceiling at 1226. The tempest in the teapot looks to be oil and we'll have to see how it behaves as their is finally the recognition that prices as high as they are at the pumps is starting to truly affect the consumer and the consumer is 2/3rds of the thrust in the economy.

I pulled half my index short last night when the futures reopened and they were down slightly. I'll be looking to reload that short at some point but we may need to consider a hedge long in between. As for today's intraday thoughts, I'm not sure you want to fade the opening but rather observe at least for a little while to see what kind of volume accompanies it. If none, then a fade may be in order. I certainly don't care to buy this opening though.

Today was quite without near the volatility I expected. We starte

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