On Monday I had my worst day since mid August as my analysis of the market had it going down, but the tape did not agree with me. The TRIN stayed very low all day, and we continued to have nice bullflag setups in the short term charts of both the Nasdaq and the SP500. Fortunately for me, I kept my sizes small, but my activity was very high so by the end of the day I donated enough for me and you to the market gods.
Since yesterday is gone, and tomorrow is all we have it does not do a lot of good to dwell on what we should have or could have done, however, as traders it is useful to look at a few things and know you screwed up. To me, the TRIN is the most important indicator showing if there is buying or selling in the market and to argue with it has never been profitable long term. Lesson learned again.
Looking forward. After a very strong day on friday, the DOW again failed to allow us to bring out our party hats and streamers for a 10,000 party. Key numbers like 10K usually serve as something of a psychological magnet in the market, so I would expect at least a test of 10k. Mondays choppy trade in the DOW allowed it to rest off some of its move from friday, and gives it a good change of having a healthy move higher. The 15 minute ADX is moving increasingly lower suggesting trendlessness at this time, but that will often occur before a breakout. Trades above $100.15 on the DIA should give it some upside, but I see a good bit of Resistance at $101ish, so its fairly limited, however, if you can find an entry on a smaller time frame (1, 2 or 5 minute) then you could get a nice trade in that direction from it.
Moving on to the SPY and the QQQ, I still don't see much upside. Many of the major Nasdaq stocks are up at LEAST 100% from were they had been earlier. I do think that the events of Sept 11th are going to work out in the favor of a few companies and give them some visibility they did not have before, and thought I don't think we will see new lows, I also don't think we will see new highs either. Right now the VIX and the VXN are both telling us the upside is very limited so I would not want to focus any big amounts of money on the long side right now until that cools down a bit. The ADXs in both the QQQ and the SPY are also very low, suggesting something of a breakout around the corner..but in the mean time the best thing, IMO, will be a light focus on the short side, but LIGHT being key. Work small entries and then look to build the position as it goes your way. Don't short just because its high though..make sure you have some valid patterns and reasons, and again, its helpful to go the smaller time frame for the entry because it offers a small risk, with the potential of a bigger picture pattern. |
