[edit.1] And in consideration of the relative clarity of indexes vs. individual stocks, I am going to focus trading on index ETFs, especially leveraged ones. Long, short, any sector – including the precious metals. Trader’s market and all.
[edit.2] With the media serving up the Ukraine relief pap and some volume coming in, it is possible that said bounce may have begun. We’ll see. I shorted QID and bought a triple long on the QQQ.
Signals continue to gather that a top of some significance is forming. Bull market top? Undetermined. But with the COMPQ (and also the NDX) making lower lows expect a couple things.
- A new bounce attempt that could be ferocious and
- Failure, with new lows down the road
Signals like this lower low, even if neutralized as I expect it will be, tend to be shots across the bow for a later date. So, my little bounce scenario played out in just 2 days (I am full sidelines now on any longs), showing just how weak this market is. But that may not have been the bounce. A fierce rally could be implied (as lots of things come to their 200 day moving averages) but the odds just increased that said bounce would ultimately fail.
One does not have to try too hard to visualize a left shoulder, a big fat head and a hard bounce that peters out around the 50 day moving averages. A drive to 4200 could involve a lot of relief and renewed optimism. People should remain at a steady heart rate if that goes on.
I’ll not say more because I don’t know the future. But I will say that the S&P 500 has now completed the minimum expected bounce with a touch of distinct resistance.
The actively managed HDGE is not over bought and just now making a breakout. That is a scary thought for stock market bulls. It’s not just HDGE either. Go have a look at SPXU, SOXS and the other leveraged bear funds out there. They are just now breaking out and also generally not over bought.
HDGE is one that was mentioned yesterday in a subscriber update. It could be a more sensible way to play 2014 from the bear side. I plan to play it both ways. This market has made me a shorter swing trader and well, that’s what I’ll be as long as needed. It’ll sure be more fun than that robot dream machine we had last year.
Guest Analysis by Bob Hoye
Click for full report
In 2001 my financial adviser advised that the people running my IRA would never allow the type of losses that I myself would suffer by trading. Ehhhhhh… wrong! -50% in a heartbeat. Thanks MFS. My wife got a 60% haircut compliments of Putnam.
I spent some time calling these fund companies pulling money out and putting it back in the markets. In other words, I day traded them successfully, taking advantage of the bear market until finally I yanked every last penny from said financial adviser and his lame mutual fund companies and went DIY. A couple years later biiwii.com happened and the rest is history, and a gain of several hundred percent on that IRA.
Anyway, preamble aside, this market has the potential to be like that phase where you successfully short the market, buy the market, short the market; i.e. trade the swings. Take the QQQ chart for example…
 …and here comes the EoD kick save attempt trying to put a tail on the candle. I am hanging loose for the moment, having taken enough lumps this week and just loving me some cash. But even if SPX gets above support, that tail on the candle could be a sign of coming weakness.
Well, say goodbye to daily support for the S&P 500; at least in-day. This is obviously not good because it is coming after a failed stock market bounce on some Fed minutes b/s. Cash and the search for bounce points to take longer term short positions (but really, cash and equiv’s is a position!) looks like the near term future.
RSI looks like it is going to 30 after failing to hold the upper 40′s. The initial target would be a higher low to the January correction, assuming today remains like this. But even if it doesn’t, the in-day breach might be meaningful.
Here’s the 60 minute view on the chart we showed yesterday…