Buyers where are you?
The S&P has retraced its way back to the 1300 resistance level after setting a new low at 1251. Talking heads say the consolidation was news driven, market analysts say it was priced in, I say its about time and this is healthy if we are goign to continue higher.
Looking across the index yesterday a ton of stocks are fizzling at support. There are setups galore but no confirmation just yet. If breadth can increase over the next couple of days and get us back to a healthy breadth ratio over 2 we may be entering a new bullish swing trading market. Until then, it will continue to be difficult to trade. Remember the indexes and most stocks are still below their 30 day moving average. Technically that means most things are still bearish. Remember 50% trend, 30% support and resistance, 15% momentum ( candle patterns), 5% volume. We really need to get back over 1300 for me to be a bull again. Im staying light in my trading, I suggest you do the same until we decide a direction @ 1300.
In my own experience:
Quite frankly, this market looks like shit. I understand that support and resistance are really just lines in the sand, but some of the activity over the last week has been [in your best Charlie Murphy voice] “He’s a habitual line stepper.” Holy shit. I cant tell you how many times I was stopped out in the morning only to find the stock rallied to where I wanted it to go an hour later. Or how many times I entered bearish trades off of broken support only to find the exact opposite happen. “The market can remain irrational longer than you can remain solvent.” In short, my lesson from this month was: don’t over play the consolidation. Playing the downside is always tempting because its so accelerated, but this market is irrational and difficult to trade. If you dont know what I mean, take a look at the above chart. Notice how we erased about 2 months worth of gains in about 2 weeks? There is a lot of money to be made there, and a lot of money to be made quickly. But trend is still and will always be paramount. If a stock is up trending, regardless if the market is in consolidation or not, expect there to be buyers along the way during your trading. Its best to reduce your time frame of your trades and your technical analysis during times like this. Recently I have been using 20 day-90 min charts to do most of my trading, it really cuts out the chatter from the smaller time frames and really highlights the intraday support and resistance levels we have been “fizzling” between. But you have to be able to day trade and you have to remain vigilent.
The short term trend is bearish-neutral.
Intermediate term is bullish.
Long term is bullish.
If you managed to take advantage of the 4 huge up days recently, my hat is off to you.
Heads Up: In the near future I plan on doing a post with a how to on how to quickly manage your 401k.