Lots of Activity, Little Accomplishment

We have a bit of a broad market bounce starting to materialize after yesterday’s high volume selling affair. The Nasdaq Composite is essentially in “no man’s land,” as it is firmly below the 50 day moving average, yet above those Egypt lows from 01/28. The good news for the bulls thus far is that the general 1294 area on the S&P 500 has managed to serve as support. Headed into the weekend, it will be interesting to see how we close, as it should indicate just how comfortable traders are holding longs into the weekend with the recent selling and headlines.

Situations like this are exactly what billionaire trader Paul Tudor Jones is referring to when he famously said that the key to trading is to “…play great defense, not great offense.” Although many bulls who held significant long inventory throughout the past few weeks may be breathing a sigh of relief today, the goal of trading should not be solely to avoid blowing up your account. Instead, you should constantly be questioning how your market posture and portfolio line up with the price action that you are actually seeing.

In the current market, unless you have been able to precisely pinpoint each short-term move, the likely result has been a whole lot of activity with little accomplishment. Traders who are looking to hold positions for more than a day or two, though, are best served by playing great defense here until we see better setups emerge.

As the session progresses, watch 1301-1302 to serve as resistance on the S&P, with 1294-1295 being key support.