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MARKET WRAP UP 06/21/10
The futures roared into the opening bell this morning, on the back of the weekend news out of the Chinese central bank that they will ease their currency’s peg to the U.S. dollar. Just after 10 a.m. EST., the S&P 500 hit its intraday high of 1131. From that point on, the market slowly dripped down into the close, to finish off 0.39% at 1113. Needless to say, intraday gains in many individual issues were wiped out as well, as overeager traders who bought during the first hour were trapped and drowning without a life vest.
As ugly as the action seemed to the bulls, it was not entirely unexpected. Seeing as we hit 1042 on the S&P thirteen days ago, we have come a long way in a short period of time, considering we touched 1131 today. While many frustrated traders were eager to call a market top based on today’s action, the updated and annotated daily chart of the S&P 500 illustrates that we are still battling just above the 200 day moving average (see below).
It is also worth noting that today was not a high volume day, which supports my belief that this is likely not a huge reversal day. From a technical standpoint, a shallow, light volume pullback from here to around the 1100 level would offer some excellent entry points to some of the best looking charts, such as $DECK, $LULU, $CMG, $VMW. Some more consolidation would also give other charts a chance to firm up some more, making them more viable long candidates.
The key point is to continue to be patient with a high cash position, and to not let your emotions get the best of you during these intraday whipsaws. To put it simply: the fight is on right now between the bulls and bears. Eventually, this range will be resolved sharply one way or the other. As we have broken out of the descending resistance trend line (see chart above), the bulls still have the short term upper hand. However, the bears retain the intermediate term edge with a downsloping 50 day moving average.
I cannot emphasize enough the significance of patience in my trading strategy. If we are, indeed, in the process of forming a sustained uptrend, then by definition there will be plenty of entry points. Until that materializes, let other market participants do the heavy lifting for you, before diving in with aggressive bets. As an example, if you had patiently sat out the late January/early February correction, you could then have put out some small long positions in late February. The correct time to become very aggressive on the long side was not until early March, and even then you would have had a full month and a half of easy gains before we topped out!
While my style may not be the sexiest, very selective aggression is what gets the money over the long run and, to me, that is as sexy as it gets.
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TOTAL PORTFOLIO:
EQUITIES (Including ETF instruments):38%
- LONG: 32% ($APKT $LULU $CRM $GMXR $ISH $DECK $THOR)
- SHORT/HEDGED: 6% ($TLT $TZA)
CASH: 62%
Awesome post as always.
thanks for being a loyal reader
Chess,
I noticed you threw TTES in your post for setups of the week on a pull back. It has since pulled back about 3 bucks. Your thoughts now?
Thanks in advance.
hey pro,
great post! i think we may test the 1090 ish area on this pull back, but i am definitely in the camp of continued bullishness.
dare i say 1300 by summer end?
ty,
could be, duane–really appreciate your consistent feedback
Indexes still in a range, but, boy some pretty scary candles out there. “>
very true–bears need to follow through here
super low volume day
right–so maybe bears will get trapped shorting here
That clown is a Japanese
how can you tell?
Because the picture is from Japanese show and I am Japanese 🙂
Really enjoy your post’s chess 🙂
thanks Goat, you’re the man
Hey i have a third leg that stronger than that guys arm.
good ole boy Rand
Always enjoyed your post.
Like Tea said, the man is a Japanese man. The words on his shirt are Japanese. Baseball is big in Japan. Not at all in China. Would be very rare to see a Chinese guy (exclude north Americans with Chinese heritage) wearing a baseball shirt.
The action of the past few months may be one of the biggest F***-with-your-head markets in my 30 years on Wall Street. Absolutely no structural integrity, no follow-through, no sense. I can’t stand Cramer but his rant the other day had some truth to it: Once the public fled, the market fell further into the grip of the SkyNet Bots, which are just whipping it around in a manner best described as less-than-random. That is: Try to apply any technical analysis to it, or any learned wisdom whatsoever for that matter, and your P&L sags.
(My trading account’s up at a 20% annual rate in this period only because I am actively defying my own signals — a practice that over the long-term will probably come back to bite me, maybe just when markets start making sense again, if ever).
Chess,
I would love to hear your ideas on trailing stops, because I’m wondering ,e.g, about apkt which rallied up 4% and brought the trailing stop now only 4% below the current price. If the stock declines further perhaps we get stopped out right before it ascends again. So then what do we do? Because O’neil’s stops were 8% below the purchase price and not trailing, so I’m wondering why trailing. Shouldn’t we give a stock like apkt a little more room to figure out what it’s doing?
Love to hear your take on this. Not challenging you ideas…just trying to learn.
Thanks!
depends on your risk tolerance
Chess,
In regards from your post last week. I noticed you threw TTES in your post for setups of the week on a pull back. It has since pulled back about 3 bucks. Your thoughts now?
Thanks in advance.