This market looks more and more like it wants to completely fall apart and that means that I have to begin to really entertain getting aggressive with shorts in the future. Still, for now, even though I think the market is moving lower until it actually does it is just trying to predict the future. Right now, the market appears like it does want to move down but if you look at the actual price action on the indexes you can clearly see that we have gone overall nowhere since June/July. We have basically been going back and forth leaving most of our longs/shorts with either tiny gains or tiny losses that, when factored in with commissions, is causing most of us to churn our accounts a tad lower. This is why I have not been able to put more than 30% of my money to work since the Flash Crash. Until the market can clearly tell me it either wants to go up or down, making any call here is simply gambling using the #1 methodology according to AAII since 1998. It might feel lower but until prices start moving lower and leading stocks start cracking on strong volume, we seriously need to be careful. I have said it before and I will say it again: unless you have a large account and trade with per share or cheap commissions, it is not worth taking positions here. We have had no short “kill” it since the Flash Crash and have only had one long “kill” it (JKS up 100%+ since 7/13). In bull market stocks like JKS appear a heck of a lot more and will normally return 2x to 3x this return it has received in this weak tape. In bear markets stocks will finally break and crater back to their 08/09 lows when the indexes start following-through on the downside with strong volume. It is still simply too nutty of a market to go big. I never turn my back on the tape and when the tape finally allows us to make big money on the long or short side I will be 100% completely ready. I never miss a big move up or down. I will not miss the next one either.
new short positions: SMTC
SMTC is putting in a very ugly intraday reversal breaking down below the 50 and 200 day moving averages, closing near the LOD, on very strong volume with BOP going negative. Cut your final loss with a close above the 50/200 day moving average area, if the stock does not move lower immediately.
Hello Joshua,
Today I read an article about the formation of a giant Head and Shoulders patter. They talked about some smaller Head and Shoulder formations that have come recently. but none of them big. Then they talked about the combo with the Death Cross..so I checked it out. I pulled quite a bit of my postions off the table yesterday and will close a few more today to be safe….I liked finding a good short here…thanks for that. I just thought to run you by the info I read in the article to get your opinion.
Thanks…..
Marko de Thailando <]:^]~~~~~~
damn it’s nice here!!
We definitely do not have a solid trend to have a lot of longs out there…weakness has certainly trumped strength so far. Today will be interesting when GDP comes out and the market reacts to the figure. There are a lot of folks calling for a big collapse, even AAIIBull index is at 21%! Perhaps this bearish sentiment will manifest itself into a massive decline. Stay tuned
So if we get follow through days with the appropriate volume than that means we are in an up or downtrend right? It does not mean we are in a bull or bear market yet?
So if we have smaller accounts then how do we know when we are officially in a bull or bear market & such that its time to start investing?
Is it better to purchase something like a money market etf or some inflation adjusted etf rather than sit all in cash?
thank you.
You are correct. You will only know you are in a bull market as the rally goes along and by the performance of your stocks from the early breakouts as the rally starts. So we get a follow-through day yes we are in an uptrend but will not know this is a bull market until we are in mid-stages with more macro data points on the rise. Remember, no bull market has ever started without a follow-through day but not all follow-through days lead to a new bull market.
We will have a big price move on the 3rd-10th day after a rally attempt on much higher well above average volume. It will be obvious by my postings in my new longs analysis how “wonderful or lame” it is.
I do not know what to recommend on that end as I only invest/trade in stocks of companies and when I am not long or short I stay only in cash. I want quick access to it to put it to work.
Thank you very much for your questions and I apologize for the late response I just returned from a week on Kaua’i.