The Daily Dose of Trading Comments

Today being a sluggish day provided me the time to get my latest Naked Trades article out. Seems as if there's never enough time in the day anymore so I'm glad to have finally penciled my thoughts down. I find that writing these pieces allows me to work through the charts and consider whether my thoughts going in jive with the set of technical indicators I watch. Not always but many times in confirms my thoughts. In fact, one of the hardest things I find to do is to stick with my projections. Many times you can get caught up in the day to day ups and down that you end up painting yourself into a corner. Man, have I done that before. After you do it, you kind of take a deep breath and say, how the heck did I do that. Then you quietly curse a bit and start considering how to extract yourself from the mess you created.

They did put on a late push to end the day and to make my weekend a bit less comfortable. The late push takes us very close to areas where, if they continue northward, I would have to start considering if I'm wrong or right short term. It comes at an appropriate time though, because next week brings the final quarter into focus, lots of Eco data and a chance to see if the trades made these last couple of days were long term or window dressing.

Have a good evening and a great weekend. Will see you next week.

It's gotten downright sleepy out there as the market seems to be drifting towards the close. My focus today was to protect and to stay short for the coming week. So far we have managed to accomplish that and unless there are some real fireworks into the close (which I don't expect) that's how I'll end the day.

I expect some early strength and then the four corners run out the clock type action. That seems to be playing out here and I'm content with that. It's been a long year and just getting back to an exceeding my highs in gains for the years provides some comfort at this point. I have a lot of work cut out for me in the fourth quarter to get anywhere near the gains that I'm normally accustomed to. I've had to adjust my sites as a result and though I always remain optimistic, I am realistic as well. I doubt the fourth quarter will be any easier than the first three quarters. And do so it goes ....

I've watched the precious metals sector with interest for a while now and that move up has been tremendous, but it appears to me that we are setting up for a correction at this point. I've put a stop under my last trading position and am bracing for a pull back. I don't like new highs on lower volume. I'll likely look to start a short in GLD again as well.

As for the general market today, I believe there is a reasonably good chance that we have seen the highs for the day. I'm in wait and see mode.

The stair step higher continues as oil crumbles again; down some 2%. I've been hedging here and there as we stair step but for the most part I realize that this is a swing trade time frame we are dealing with here on the short idea. I thought they might support the market this morning and the strength in the chips really helped but honestly, internals are negative, volume is so-so and I don't see this strength really taking off today. I'm sticking with my thesis and am writing the next edition of Naked Trades this morning. It should be out by the end of the day. My focus is on the fourth quarter and what may be in store for these markets.

Negative divergence this morning between the NASDAQ and the NYSE. They keep knocking on the door on the NYSE trying to break through the 1227-1228 area as the NASDAQ chips are bucking for bigger gains. On a short term basis, either the NYSE will hold and they will all come back in or vice versa. It could be the latter but I have no strong bias here. Lots of folks happy to make sells into this strength it appears. It's always a question of supply and demand though and right now it appears there is more supply than demand on the NYSE unlike the squeezed chips.

The data is on the table now. It was better than expected. We got a pop but there was no volume and no follow through. Chips still strong but that's about it. I've reverted back to my short position with a little better basis and made some small change on the side.

Chips are acting well and I covered the shorts on the dip and look to put them back out a little later this morning. Got long the NDX for a trade as well. Idea is the same but I'm always positioning for a better trade. When the chips are leading I don't care to be idly sitting short. As I said this morning, support early today and then a 4 corners defense.

There are two eco numbers out once the market begins trading today, 15 minutes in is another sentiment number and then the more important PMI 30 minutes in. I think the market is looking at these numbers more skeptically now so unless they are really ugly in should probably weather them. Of course if they are not so bad, then that could give the push the market needs/wants to put the bears on the defensive this morning.

Futures still below fair value. Let's see what they got in store for us today.

Here we are, the last day of the week, of the month, of the quarter. Perfect isn't it? Will it be the last day of the rally as well? Maybe not that perfect.

Midday yesterday the market looked to be getting ready for a push. I talked about it likely tagging the 1225-1227 SPX, 1589 NDX areas. It not only tagged them, it closed at them. Now, with quarter end upon us you have to expect that they will support this move, at least through the lunch hour down on the street to ensure that the price gains sustained won't be completely lost.

I don't write about window dressing all that much, but it happens so regularly that it's hard to miss. As a portfolio manager, consider what is required of you. You have to take stock of where you are; what gains and losses have been sustained and what your overall performance to date is and then you have to report that to your clients. If the market is doing well, then you had better not be doing worse because, after all, that is how Wall Street evaluates itself ... Did I perform as well as some benchmark? That benchmark is usually the S&P 500. So, there is a lot of pressure to buy if things are moving up and a lot of pressure to make sure things close strong and show the best possible performance each time you have to account for your performance.

Problem is, once the snapshot is taken, then you have a tendency to unwind some of those buys as the fear sets in rather than the greed. Now it doesn't always happen and sometimes it seems more prevalent than others. This seems to be one of those times and is why I've talked about it as much as I have. I usually don't.

So, look for some early strength and look to see if there is any volume to the follow through. If it's not, I would look for the big boys to pull in their horns and simply protect till the end of the day. In basketball they introduced rules, namely the shot clock, to speed the game up and to get rid of the tendency to stall. I don't know what an equivalent rule change would be to the Street and none is in place currently. Expect the four corners stall today.

Sometimes it seems so obvious ... when things are going your way. That's when you have to pinch yourself to realize that it's just a moment in time. The market has a way of changing your thoughts with its actions and reactions. Take today for example. I have talked all along about the need to consider shorts into the 1225 SPX area thinking that from there, a swing trade idea would be good. Now that it's here, and now that I've done it, I don't feel so good. Is this really short covering and window dressing? Is there something more to the move?

There's an old saying that things look the worst at the bottom and the best at the top. I don't about bottoms and tops but I do know that when you fade a move it never feels good until it turns in your favor. That's true on intraday trades and on swing trades. I leave today with a good feeling for the trades made. I look at my open trades and feel OK as well but recognize that tomorrow will be important as to whether the fade has a good chance of working or not. I'll probably think about it more this evening and I'm sure I worry too much. I have a habit of doing that. But you have to step back and look at the trade for what it is ... a trade ... a setup with risk/reward that makes sense for the time frame we are considering. That's all it is ... just another trade.

On the last pop higher, the NASDAQ is waving the white flag as it's out of gas. That tells me it has been short covering today. I'm sticking with the idea that now we have to consider short exposure from a swing trading perspective.

This is one heck of a squeeze they have going today. You have to look at the quality of the rally though, is it short covering pushed by quarter end window dressing or something else. I would suggest that's what's happening and I would also consider that we are moving into the range where we have to think of swing trades lower, not higher.

I'm thinking shorts up here that are longer than a day trade. It's about entry and exit and time frame. Consider what you are trying to do and consider where you are wrong when you take the trade. After that, it's all about execution.

It's getting more interesting now as 1220 is recaptured and 1225-1127 is in the market's eye now. Same is true of the NDX. Over there, 1589 is the next mark. Both look to have a good chance of happening today.

I've been fortunate to not fade these moves and get squashed in the break higher. I'd like to turn and get back onto the long side on a retrace of this break now. Again, thinking the NDX as the proxy.

Sometime I get immersed in the minutia of day trades. If you work with futures and if you can take losses and, if you can read charts, futures offer something stocks do not ... tremendous leverage. When I was younger and didn't appreciate that statement I ended up losing a large chunk of change. Sometimes, they say, experience is the best teacher and the punished, the best learner.

The bigger picture here is really still the same. The indexes are trying to break through the resistance at the 1220 SPX and 1578 NDX region. Both areas have held advances before and so far it looks the same here today. One thing that you learn as a trader is that ranges are great until they break and you have to be able and ready to cover and run when they break ... if you are on the wrong side. Otherwise, you work the ranges back and forth reaping the rewards.

This week has been all about range trading. You fade the strength when it comes in bursts ... like this latest run, and you buy the weakness when it comes in bursts as happened twice this morning. If you are leveraged, the 5 point SPX move on 1 contract is worth a little over $200. It's not for the inexperienced though nor the faint of heart. You really have to cut losses or you can get chewed up and spit out worse than tobacco.

I'm watching for the fade right now to re-enter long on a buy. I'm thinking that they really want to take out that 1220 area on the retest and that retest should happen by end of day. If they fail on the retry, you have but one day left on window dressing and that might be the death knoll to what has been a very weak bounce off an oversold condition.

Well, we exploded on short covering again. I've taken those profits and am looking at the short side of the equation again here on the euphoria.

There's the break higher so I'm going with some NDX futures for what may become a swing trade.

To follow up on that last post, I want to see the RUT break it's downtrend line of 3 days to signal a move higher.

I'm seeing positive divergence between the NASDAQ and the SPX this morning and that makes me back off of the short scenario for now. I'm looking to get long as a result for a trade.

This market is giving us decent intraday volatility and if you want to trade it, you can't gripe about that. I keep fading the extremes (both sides) and keep asking myself how long the range fade trades will work. Answer to myself: until end of month probably but don't count it as written in stone! The market is vulnerable here to more selling. Still negative internals and as oil whips around the market seems to be led by the nose on each rise and dip.

Is it just me or does the volatility seem to be picking up here? It's getting hard to trade as a result. I've done a couple quick trades but missed the two big moves that happen down then back up. Breadth negative and volume running about average with yesterday. SPX tested the bottom but they supported it at the lows twice more today. That just makes that line in the sand even more important.

Precious metals running again. Looking like an energizer bunny at this point. Look for continued volatility and, at least so far, it still looks to be range trading.

This market is hoping for higher prices and hope many times leads to short term disappointment. It feels like that is what is about to happen. It feels like we are going to see some quick throwing in of the towel today by some who have been hoping that end of quarter window dressing would cause higher prices. So far it hasn't and it doesn't look that way today either.

I'm finding it harder and harder to like this market. Time has been on the bullish side but even that is starting to run short now. Despite the end of quarter mark ups which are truly being carried out it appears, there is a stench that is growing on the Street. When the rot will be discovered I'm not sure but I am sure that I don't want to become a part of it.

I see gold and oil up again early and futures about even. I see a market that is rescued each day when the mutual funds put money to work. Will they be able to hold it up through week end?

My desire was to short strength up around the 1225 SPX area. So far, 1220 SPX has contained any advance. If they don't break it today I doubt they will and it will be time to consider a swing trade to the short side rather than the range trading we have worked so far. In fact, I'm more concerned about range trading on buys now as we have done along with short trades this week. I'm more apt to take a short trade now than a long. Any longs taken have to be on a short leash.

Take a hard look at the 1212 area SPX. If that area falls today it could get ugly before month end.

I'm closing the books on today. I caught a couple good trades and have been fortunate enough to take my totals back towards the high of the year ... which really isn't all that good but hey, you are in this game first, to not lose money, second to make money and third to beat the averages. Some years they reward you, and some they don't and so far this one has been one long on promise but short on delivery.

That short covering squeeze, if in fact that turns out to be what it is, has taken the indexes almost back to their early highs and they aren't giving it back up so far. With an hour to go it's anyones guess as to how the end plays out. I would bet on some give back if I had to but I don't have to and so I won't. If they bring them in enough, I'll have a buy waiting on the NDX.

Hope you caught a good trade or two. We've but a couple days left in this window dressing week. The volatility is probably going to remain a while longer as is the range trading. See you tomorrow.

The window dressing steps in to rescue the markets ... right on time and I exited near the bottom of the last plunge. I didn't have enough gusto to turn and go long though and am now measuring where I might want to work one more long or even a short trade depending on how far they take them. Volatility is the name of the game here and as long as there are mutual funds trying to protect their disguises going into end of quarter, you just have to play along with them.

I do not like the way this market is shaping up. I've taken my long exposure off for pennies profit and am simply sitting short again. The question now is what it was before; is this a range bound market or is it about to trend again. We bought some time to try and answer the question but so far the answer hasn't been answered. The additional information we obtained though was a retrace move higher that gives us a stop out point to take profits on the SPX short and that's what it's all about. Just another way to play the move as we try to obtain maximum profits.

Gold is jumping again and I added there again earlier this morning with GG. Oil up almost 3% now and it's hard to see this market move up much as a result. If they are going to window dress this month they have their work cut out for them.

Well, sell it off they did. That was a decent setup we took short and it paid some dividends. Now the issue is are we still range bound or is turning to trend. Rather than take the SPX profits here, I've gone long some NDX instead. Let's see how the next hour plays out and what the bounce looks like from the sudden plunge. We can use that knowledge to decide range or trend. My take is it's still range.

Crude oil seems intent on making this 1220 SPX area painful to scale. I've been watching and waiting for the next opportunity to put on a trade, long or short, for the day in the futures and have finally struck a short position on the SPX. Risk 1 1/2 points for a potential 4 point move down. Just too much resistance up here and now we are losing some breadth as well.

The Russell turned green, barely, and the oil numbers were mixed. Market popped but I'm inclined to wait it out. I had a couple good trades early and I'm going to wait for things to settle out a bit before doing anything else. If I had to do something, I would short these highs for a trade, but I don't have the setup to do so.

Keep your eye on the Russell. It's the main tell this morning and it's telling us to be careful. I made a couple quick trades booking small gains and am standing aside now in front of the oil inventory numbers. It's a toss up on direction given the numbers.

Nice solid, broad advance so far. The only concern is the Russell which is red. That's another warning flag that we are still range trading. Don't chase these stocks higher. Oil inventories due up in about 30 minutes as well and that could change things in a hurry.

Last night as I was working through a number of charts putting together my thoughts for the next edition of Naked Trades, I ended up buying some NDX futures as they were down a point and a half in the overnight session. It has nothing to do with being enamored by the current market, but just the timing as I talked about yesterday. There's fear on both sides, but the timing is such that it's harder to go down right now than up which means you can work trades that direction by fading the moves.

Again, I'm not enamored about this market and I do want to short it at some point. That point will come when the bullish timing plays itself out (if we simply go sideways) or when we get a push to resistance that has a greater likelihood of holding or we simply fail without either of the above happening and break through critical support. Right now we are about halfway between the two extremes of support and resistance and working a range. Nothing more.

Yesterday I commented about fading the moves ... up and down. Today has been the same and it's likely that this oversold rally will be punctuated by such trading action. If you have the heart to trade such moves you can make a little change. My take here is that we should still favor the long side of the equation only due to time. That will change in the not too distant future, but right now time is on the side of the longs. I continue to favor that side but to do so not on momentum but on weakness. I also keep working in a short or two when the short covering leads to spikes that spike right into a resistance area. Nothing fancy and these types of trades do not always work, but in a range market they are the trade of choice.

I'm folding up shop at the bell as I've a number of items to tend to. See you tomorrow.

Well, they indeed did reward those who gutted out the retrace day here at the end. I would look for some continued strength into the close as they have the shorts on the run at the moment. I still don't like the quality of the rally but it's here nevertheless and you don't necessarily have to like something to work with it.

As the last couple of trading hours approach, the market is starting to take a bit of a beating here. I did take some long exposure earlier but it was peeled off at breakeven on the latest drubbing. I'm considering it again. So far it's been just a slow drip lower. Again, the key level in my mind is the 1210 area SPX.

Breadth is negative, confidence is waning (consumer confidence) and the market is heavy once again. Step back and look at the chart. We had three days up on lower volume. You have to expect the test of the lows off this pattern. That's what we are seeing here. The oversold nature of the market makes any plunge that could carry a lower probability event but it doesn't rule out a plunge. So, the higher risk/reward play is a fade of this lower move ... at the right time. I'm watching for an entry point based on price, time and volume intraday. I would like this purchase to be a swing trade and will use the general 1210 SPX area on a closing basis as a notion of whether we are right or wrong.

The small caps are getting no lift today and that really puts a lid on any attempt to advance early. The greater risk remains to the upside short term but there's no conviction so far and I'm staying in cash so far this morning because at this point I still see nothing I can do in terms of a trade setup.

When I look at these markets right now, the only thing I can find that's supportive is time. There's the oversold short term time frame. That may keep us propped up. There's the month end/quarter end time frame. That should be supportive. There's another week before the warnings really start to hit if they are going to. That should be supportive unless we get a beat others to the street with bad news effect starting up. You get the feeling I have.

I can't find a technical reason other than time to be bullish. In fact, today is going to likely be a tough trading day despite the advantage of time. Yesterday showed weakness is quite prevalent as the early advance turned into the midday wash out and finally the late day window dressing. Time, time, everywhere time. We now have three days of advance on weakening volume each of those days. Time will soon turn against this market.

Talking of time, I'm taking mine as I stalk swing trades short. The idea situation would see the SPX trade back to the at 1225 to 1230 resistance band in front of earnings. It would offer the lowest risk/reward entry short setup. If we don't get that, then a turn lower has to be respected. That 1201 SPX area is sacred at this point. A trade lower than 1210 puts us in jeopardy to retest. A break of 1201 on the test throws time out the window. Just keep that in your mind as we bounce around here aimlessly.

The end of quarter games are combined this month with an short term oversold condition. I know I repeat myself at time but when I look at the late push in prices back to positive levels I can't help but think about what's likely going on here. Mutual funds and other players who have to show their books at end of quarter typically want to dress up their holdings to keep their customers at ease. That tends to result in the big players supporting the prices on those stocks that they are in with size. Today's late action looks a lot like that.

Today does hold a story that's bigger than end of month window dressing though and that is that despite the reasons this market should be able to push higher we are instead seeing some real problems in doing so. That is going to be an issue in a few days as the quarter comes to an end and as the short term oversold condition eases. If we do not see a reasonably good push occurring with significant volume behind it, then this rally will be sold and it will be sold in size. That's something you really have to keep your eye on here. We are not that far from the highs of the year and multiple years even. That means there's a lot of correction to go if this indeed is to occur. At this point I'm relatively comfortable in thinking that the odds of a higher high on this move are almost nil. We have to keep that in mind regardless of the direction we trade intraday.

I'm out of here. Have a good evening. See you in the morning.

Although the markets have traded back to red, given the steep move in crude, the reaction hasn't been as bad as it should be and that suggests that the oversold nature of the market is coming into play. The result is that I can't really make a short or long trade at these levels from a swing point of view. Can't make the short trade yet as the oversold aspect limits the profit potential such that the risk/reward isn't favorable. Can't make the long trade because I don't really know that we will get much of a lift. So, I sit here mostly in cash. I rather be making a trade but I just don't see a good reasoning for one. If the market offers a fat ball I'll take another swing, but right now I just don't see it. Afternoon trades are typically less rewarding for me as they tend to be trend followers not faders and I tend to like to fade.

This is a pretty ugly reversal taking place in the market as oil just want give it up. I have to say I didn't expect it as I thought we could get more of a rise before the real selling set in, but hey, we all know the upside is likely going to be tough so we should be overly surprised if any climb is short lived.

There is support for this market for the remainder of this week and if it cannot use that support then you have to consider that things are really worse than they appear. I continue to monitor and keep my wagers reasonably small but this reversal makes afternoon trading even harder. I may find myself on the sidelines as a result.

We have witnessed reversals now in both oil and gold and that doesn't bode particularly well for continued strength in the equities. Now exactly what you want to see if you want to be bullish. Range trading sure looks to be back in for a while and buying breakouts doesn't seem to be the order of the day here. Fading strength or weakness is more likely to provide dividends. It's with that in mind that I wait for an opportunity for another trade intraday.

I didn't expect this much strength out of the gold stocks today and I let the GG add early out too soon it now appears. The other moves early were to add back some CDE, add more FNX and to move out of the short. This still may be a reversal test/failure pattern on the metals but at this point it is wiser to play it long with good stocks and see if the failure occurs rather than to anticipate it.

There is still good breadth but volume is so-so.

If I'm looking at this market as an oversold bounce versus a leg up, then it's important to consider where the bounce can carry to. SPX, the 1224 area looks like some rather serious resistance. That was a key area on the way down and now becomes the same on the way up. 1225 to 1232 or so should contain the move if it's going to fail. 1225 would be a good short if we get there today or tomorrow as we should see a move back off that area and then a retry to take it. You can extrapolate these numbers to the other indexes as well. For example, 1589 NDX is another key area. The NDX is already running into the resistance here at 1584 since that's the 20 day MA. The 50 day MA is up at the 1589 area.

So, there's still a little room to run, but it's not unlimited short term so don't get sucked into the idea that it's time to buy and hold here. This is not what the charts are telling us.

The early breadth is solid but volume is not huge. This is the first indication we have on real strength and it makes me think that, at least for now, this is just the usual garden type oversold rally taking place. It will take more evidence to know that this is in fact what is taking place and that will play out this week, but for now, that's the thought.

I did take some early long exposure but have liquidated already. Just trading the futures intraday. I like the long side today, but I think it will be a lot of up and back rather than a breakout type move.

Contrary to the first post, I have started averaging in to a few gold positions this morning. It is likely early but I like the way they are shaking out on lower volume.

The fear was that Rita would be another Katrina but it turned out to be far less. Midday Thursday and again on Friday the market began to sniff this out and turn north as a result. The technical breakdowns were the first in a long while and now an attempt to correct them is in process. It will take a lot to do so as the damage was not minor.

Unless you took the gamble in front of the weekend, this gap up offers little to do. Not sure I want to buy it immediately but have a sense that it's going to carry today. I'm not enamored about the long side of the market but I recognize that it's month end, quarter end and the markets are short term oversold which all leads to the potential for some sort of rally. The question is whether it turns into a two day wonder or something more like a week or two. I will look for a long entry as a trade but I'm not going to rush anything.

The oils and metals are selling down today. Our short GLD may finally perform this week. The setup is still there. I do want to average back into the metal stocks but I'm not in a big hurry as they probably have more work to do to the downside.

I'm done for the day; flat and heading for the exit. I tried one more long there at the end attempting a momentum play on the break higher out of the intraday flag but there was no juice and they sold it back down. With that I'm through until next week.

Talking about next week, we have the makings of confusion. Had we gotten a further push down today, next week would have seemed a lot simpler. With the oscillators over sold and wanting to push up a bit short term and with the big sell off this week, next week looked to be a nice bounce trade situation with the idea of shorting again back up around the 1225 SPX area. Now it's anyones guess as we are sitting at 1217 as I write which is about the middle of the 1230 to 1201 range. Nothing cooking there.

How this market reacts early week will be a function of what damage Rita deals to the coastline and that's guesswork at best. If you don't have a perceived edge, then protect your capital and wait. That's what I'm doing.

To all those in harms way, my heart goes out to you. Having been born and raised in that part of the country I feel a special pain for those being affected. You have empathy regardless of where a person originates but when it hits home it always feels a bit more intense. Good night.

The market is finally offering a long entry on the SPX ... a place where you can risk 3/4 of a point. I've taken the trade and will see if they want to try and make a run at those earlier highs again. It's hard to see a big move up but we have a wedge that has formed over the last couple of days that looks to want to break topside. Guess everyone wants to get in front of the relief rally that is now being gamed for next week.

And the beat goes on ... as the oil trade fades the market continues to find buyers on this weakness and they are looking to take things green it appears. I booked some early gains a little while back and have taken a back seat now as I think long short term.

It's not going to be an easy trading today as the volatility is likely to be high. There's the battle between those who want to get in front of the news and those trying to get out of positions. Oil is helping the longs as it's saying that even though we have a hurricane about to hit the major Gulf fields, there's no need in putting more premium into the pot. The next hour will likely decide the remainder of the mornings direction. Still unable to call it though I'm leaning short into it.

The markets made a bee line lower this week right to the areas where you would expect some support. The question now is whether or not that support is enough on the differing time frames you trade. Short term, it may be enough as the oscillators favor a bounce of some magnitude soon. Yesterday could have been the start of that but many times, the first bounce is sold and then the retest tells you what will really happen.

On an intermediate term time frame, I think the bull move for this year is is dire jeopardy. The Russell and the NASDAQ have turned lower on their monthly charts and the DJIA and SPX are not that far away. Once they confirm it should get uglier. That doesn't mean that we can't see a move all the way back to the 1225 to 1230 area SPX as that is always possible given the charts. It's just that such a move sets up a shorting opportunity if it occurs.

As for today, I thought about this too much last night and am wondering if I'm over thinking it. Today should be a down day with the uncertainty that lies ahead of us this weekend. There will be those who try to get ahead of next weeks move and you have to wonder if there will be enough of them to lift these markets. Next week you will have the news and so far they have sold the news which means next week they will buy the event once the news becomes the event. Suggests to me that I will likely want to be flat by end of day on the index trades.

Rita gets downgraded to a category 3 and those front running the news are rewarded. That wedge I talked about earlier did break topside and they got some short covering juice as part of the move so it really spiked. Oil down over 4% as I write and I'm looking for this spike to hold now. Still don't think I would want to be long or short this market come sundown but there's probably a reason to try and ride some momentum on any decent pullback in the next half hour.

These short covering rallies can be killers if you don't have thick skin. I fully expected a rally, but you never know just how far they will carry once they get started. Today they carried it right until the closing bell. I was busy trading the futures today concentrating on both long and short positions at different time frames and I did get punched out on a short trade with the steep rally near the end of the day. If you intend to trade futures though, you know there is a point where you have to bag a trade even though you know you are right in the end. That's leverage.

Overall, this market is nervous and it's sitting on the edge of the cliff wondering if it should jump. So far this year, each time it has peered at the wild blue yonder it has gathered itself and made a stand. Tomorrow should be quite interesting because we will not know the damage of the storm until Saturday or even early Sunday so it's not as if you can make a big bet either way in front of the news. The way things have lined up makes it very hard to see a trade to the upside tomorrow given what has come down the pipe already this week and given that AA added to the warnings parade after the bell tonight. Add the technical setup to the picture and that we went up on slightly lower volume today than we came down on and I'm thinking tomorrow might be a bit ugly. I've maintained short positions into the after hours as a result.

Now the question becomes do we get the follow through and does it come early enough that we can outlast the volatility that is coming back into the markets. Promises to be tough. I'll be here as usual cause you know there's another trade.

Well, there's the short covering spike again with a little more than 2 hours to go if you are so inclined. I'm getting short again as a result looking for some weakness to set in as we head towards the close.

Other than that one early trade to fade that short covering rally, I've been unable to find an entry point for further trades. The character of the market has not indicated that it will break down further and in fact, there's the opportunity for another short covering rally if those early lows hold. That will be the test. I would love to see them hold for another 2 to 3 hours as I want to short into any short covering strength. Problem is they might not hold and our entry point for further downside would get more risky causing us to either forgo entry or take on additional risk.

I don't see any advantage to take huge risks at this juncture. I feel fairly certain that tomorrow will be ugly given the weekly setup unless we trade much lower again today. So, the ideal setup is a bounce where we can get short again sometime today ... preferably before the last 2 hours of trading.

Volume has been heavy but orderly other than the sniff of panic at the opening.

Yesterday I talked a bit about last gasp type moves and how I thought that was what we were seeing in precious metals. Today they gapped them open higher but that quickly faded and now they are quite red. Another reversal. I added one more time yesterday to the short position in GLD and now am looking to add as we accelerated on the downside on any strength intraday. The market has a way of giving you a graceful exit on turns when the direction was recently up (tops take longer to form than bottoms) ... the problem is that you have to be aware of what is happening though and correctly identify it for what it is.

The market is quite volatile today with the market showing that it had become to oversold on a very short term basis. Again, with what lies ahead, I don't think that any price appreciation can stick for very long though and short setups are a viable play today.

Well, they didn't even stop to test but instead ran straight up into the first resistance zone where I'm shorting again for another trade. Today makes sense for some sort of short covering rally but don't expect it to hold too long.

The mood was just too negative this morning and the markets look to be setting up for some sort of rally now. Another jig lower to test the lows and, if they hold which is likely in my opinion, then a sharp bounce is a higher probability.

Oh, how quickly a market can turn. Yesterday's support at the 1212 level SPX gave way and now the intermediate term trend has officially turned down in my books. With Rita on the way to Houston (my home town by the way) it appears that the markets are barreling towards a climax as well. I'm starting to sense some fear in these markets and that's when the trading becomes most difficult. Climatic situations are chaotic.

Given the timing of the storm, it's now appearing as if a lift in these markets will come in half hour spurts if lucky as the event is to soon in time after Katrina. People have a way of overweighting current news as opposed to more distant news and right now Rita and oil are front and center. This will pass and the market will take a second look at some point, but right now it's ugly and has a decent chance of getting uglier. All that remains are the swing lows directly below us (already broken on the NASDAQ) and the 200 day MA. We see the breakdown in many charts now and it looks as if it wants to get worse, not better short term. Naturally that sets up a snapback rally at some point and with a long weekend of uncertainty, depending on the damage from Rita it could come early next week.

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