Monday, August 8, 2011

Case of the Mondays

You know it is a bad market when a down day like today does not yet feel like capitulation. Since I label myself a trend trader, I had to capitulate myself and start trading to the short side, which I started on Friday. I only made 2 trades today and one on Friday. I made some money and that felt good enough, I did not want to push it. I did hunt for longs today and Friday, but the early list was so small, and the trading so weak after the first 20-30 mins, that I started poking around on the short side till I found something that fit my parameters. Today it was MCO (good gain) and NU (for a loss), Friday it was CLGX (good gain). It hardly matters, you could have randomly picked 10 stocks and have had all ten of them work out if you just blindly held them. Problem is I cannot foresee that, so I have to still play my game, with my same risk management parameters.

I have been reading and watching a bit more trading info than normal, seeing that this is an abnormal time, and have noticed a lot of active traders have been slow to move to the short side. Many had the same feeling I had, feeling a little foolish for not being short sooner, and I would say all these traders list themselves as trend traders. I think, truthfully, most of us fight a long bias. We believe that things will turn out for the best, that people will make and sell incredible new things, etc. Also, the previous trend has been 3 years up, so it takes a lot of evidence that the trend is down.

So the same for me still. All cash at night, make a trade or two during the day, bring home a 'paycheck' to my family. The market is so volatile that I am treading very carefully. This is not a time for me to be long stocks overnight. If the morning gappers are as thin tomorrow as they were today, (I think BSFT was the only long that looked any good. I didn't trade it; black candle) I will have some shorts up on my screen from the open.

Will we get capitulation, a big cathartic flush down? You might have thought Friday, but today was even larger volume. Will tomorrow be larger and lower? I don't know.

Will we get a violent snap back rally? No one knows. The leash is stretched pretty tight. Will gapper plays work during this? Maybe not. I may have to play the indexes, but there will have to be a setup there that I am comfortable with.

Lately we have been sliding down a wall of worry. It will be a good sign when the market starts shrugging off bad news. I have no idea when this will be. No one does.

Will the SPY end up testing support around 100, or around 85, or the 2008 lows? No one knows.

One thing I do know. On the weekly chart, it does not look like the end of the world. Hopefully it will not get that way.

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