MARKET WRAP UP 06/02/10
The bulls showed some heart today, for the first time in a while, as they took the S&P 500 up 2.58% to close at 1098. It always amazes me how sentiment amongst traders can shift so quickly in a volatile environment. One day it seems like most traders are storing canned peaches, coffee, and unauthorized cinnamon in their apocalyptic storage areas, and the next they are looking to ride their newfound “momo” longs. Even on huge up days like today, the fact remains that violent day-to-day price swings are friends of the bears, and not the bulls, as the market is reflecting the uncertainty of the current economic landscape.
Because of the continued wild price swings, combined with the fact that we are chopping and flopping around below the 200 day moving average on the S&P 500, I believe that the bulls have to overcome the burden of proof here. One exuberant bounce does not an inflection point make. As usual, follow through is key.
Those of you who have followed my work know that I do not try to perfectly time bottoms and tops. Rather, I want to participate in the “meat” of the move. In other words, I am willing to miss out on the initial and final 10% moves of a trend, so long as I ride the 80% in between. Frankly, I do not care whether that means I am going long or short. The goal is to make money, instead of choosing a gang and stubbornly sticking with them.
Despite the big move today, the updated and annotated daily chart of the S&P 500, seen below, illustrates the still shaky backdrop for the bulls.
My final takeaway from the current predicament is that we are in the soup right now. The 1100/200 day m.a. zone continues to be a key battleground area. Buying and selling volumes have been declining over the past few days, so we are likely to see resolution one way or the other. Both bulls and bears can point to solid arguments here. Until this mess gets resolved, however, I will continue to sit in cash and let others do the dirty work for me, before allocating my capital.
Nice post, and I think you can add that there are likely to be fakeouts and what not that will trap people both ways. Although I do think a resolution is coming, sooner rather than later.
Thanks–yes I totally agree with all of your points.
Another fine piece cHess.
Thanks Goat!
Nice post as always!
Chess,
Would you give me your take on AAPL with regard to whether the recent bottom would count. From what I understand, it should be lower than the previous one, which it would be if it were not for the “flash crash.”
So the question is, would you count the tail of the flash crash and concluded that the pattern is not a double bottom?
Thoughts please?
I say all prices are valid unless your trade got cancelled. As far as AAPL, I think it is a short with a stop around $270 or so. Flash crash or not, the stock has a loose and sloppy neutral range after a huge run up, as opposed to a tight low volume consolidation which would be bullish.
agreed. no jumping the gun here….wait for confirmation.
checkersNbeer LOL never gets old. Nice 1.
Well presented, not strictly TA but blended, i.e. shaken not stirred
Indeud.
Indeud. Well said sir.
Thanks Yogs—appreciate you consistently reading my posts.
Just wanted to tell you I found and traded the “three drives” pattern you described four times today. Once short, thrice long. All winners; got some chicken dinner.
At least I think it was you that talked about three drives. Hmmm. Maybe I am mistaken. Meh, I’ll give you credit regardless.
Hey Moobs,
Can you elaborate on the “three drives” move? I must have missed it.
thx
The tool I was referring to was a little diff than this, but this is the idea. http://www.harmonictrader.com/price_patterns3d.htm
See the soldiers (white/black) at the bottom:
http://stockcharts.com/help/doku.php?id=chart_school:chart_analysis:candlestick_pattern
Thanks Moober, much appreciated.
Moobs–I think that was GETGroup who was talking about that in the PPT. He was referring to the “three white soldiers” bullish pattern. The bearish version is called the “three black crows.”
Another excellent post, chessnwine… Thx!
I see that SPY still sits well below its 25 & 50day MA’s. Was today’s monster move short of enough volume to be called accumulative in your opinion?
Also strange weakness in copper given housing #’s???
Watchlist CMI ROST TJX KMX SHOO CEO ALB CATO TROW THO NEM CHD DBRN PCLN INT BBY PRGS ISSI TGB for when this coked-up market settles into something more tempting. Any thoughts appreciated…
all depends on follow through Jim. volume is not great but as long as we dont see distribution here we will be ok
Nice Post… you seem to have confidence when others seem to be running around not knowing what to do (or changing positions every other day).
Thanks for the clarity.
PS – 80% cash 20% low beta stocks from the last “bottom” and you are right it does feel good…
Thanks Donnie. The reason why I am confident is because I have defined my trading style, and it has worked well for me over time. Many traders often let the current market conditions define them, and they are thus very inconsistent in their trades and confidence levels.
1103. The market will appear to flip-flop around that pivot. It has everytime it’s been in that neighborhood over the past 10 years.
Don’t ask me why….
Interesting, thanks alpha
Thanks for the insightful posts. Can you be followed on Twitter also?? Thanks again! john
John,
You can find him here:
http://twitter.com/chessNwine
Thank you!
So in other words, you are saying “wait for the cream!” Chess, do you trade options at all?
Mostly no. I stick to equities.