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MARKET WRAP UP 06/22/10
After yesterday’s bearish reversal, today featured an initially flat market that eventually gave way to a late day selloff. With the S&P 500 closing down 1.61% to 1095, any sense of complacency by market participants was replaced with fear of further downside after losing the 200 day moving average. Moreover, the market also closed under the psychologically significant 1100 level.
With that said, today was not a high volume selling affair when compared to that which accompanied each thrust down that we saw in May and earlier this month. Further, after the market’s huge run up from 1042 to 1131, to retrace half of that would not be unheard of.
As the updated and annotated daily chart of the S&P 500 illustrates, despite losing the 200 day moving average today, the 20 day moving average is sloping up and could easily be a place where buyer’s step in (see below).
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Incidentally, the pink resistance line that we broke out of last week is right where the 20 day moving average is, and a retest of that area is likely to be the next battleground area. Moreover, to find support around these levels would put in a nice inverted head and shoulders bottom on the daily chart of the S&P. Strategically, I am trying to balance out my portfolio with the competing bearish and bullish arguments. While operating below a downsloping 50 day moving average is certainly bearish, we cannot discount a rising 20 day moving average.
Thus, I continue to be hedged in my portfolio, with a large cash position. Despite my gut feeling that the selling over the past two days was a mere shakeout, I will respect my stop losses and be properly hedged. Trading based on hope is not part of my strategy.
As noted earlier here and in The PPT, I made some changed to my portfolio.
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TOTAL PORTFOLIO:
EQUITIES (Including ETF instruments):42%
- LONG: 34% ($APKT $LULU $CRM $GMXR $ISH $DECK $THOR)
- SHORT/HEDGED: 8% ($TLT $TZA)
CASH: 58%
No kidding, but really it’s still the same bullshit from 2 months ago.
I’m starting to agree with Scott here, you either take your stand with a wider stop(and more pain) or stay out completely. Try to follow the standard rules and this market will chop you up.
Personally I’m doing both, staying heavy cash but leaving wider stops on my existing positions.
TA,
How wide are you placing your stops. Not sure which way to play this. My Trailing stop, which was 8% is now only 1.6% on APKT.
Oh well.. there’s always another day. Hope things start to turn around tomorrow.
I’m playing bases and breakouts on leaders.
Normally I sell when the breakout fails but these days I’m selling when the base fails.
I got stopped out on too many good plays because I got whipsawed on the volatility only to see them rip higher.
It sucks because the losses are higher if it fails but I’m keeping position sizes 1/2 of what they once were and lots of cash.
The market is set to fuck everyone more than usual, even Fly keeps flipflopping because it’s impossible to game.
Waiting for better times.
TA,
Very interesting and logical. Perhaps one day I’ll have my own system figured out, but I guess it has to change with the times. I’ve got multiple ideas now, but as for now they are still own the drawing board and will require testing.
Thanks !
Hi Chess,
It seems that you use the simple moving average. Any thoughts on the SMA vs the EMA? Thanks.
i look at the EMA’s, but for the sake of consistency and to avoid cherry-picking, i only include the SMA’s on my charts.
every post, every day…same thing–excellent interpretations. Just sayin.
thanks
Between a rock and a hard place. The thing that really bothers me is that if the bottom we put in at 1040 was really a “good bottom” this rally should have been a lot more healthy. Another more troubling clue is that yesterday the 10 year was where it was when we were at the bottom.
Obama looks different pn a wanted poster. Or is it osama? So had to tell these days.