Now with the Fed report out of the way, hopefully we all can get back to investing in companies, and not on the news. If you stuck around for the announcement at 2:15 pm you saw some major whipsaw action! Investors got what they wanted- a pause in rate hikes – but there was no rally! I thought nothing was going to happen (ie, close in the average range), but the Dow actually sold off to close down -45.79. So it’s a little worse than I thought… now it’s even more difficult to predict the market. I’m still bearish overall, but with the Fed meeting out of the way, a good earnings report from a huge company can send a sector on fire, which then would send the entire market up. Essentially, the market just go more moody, but what can we expect, it’s August.
Anyway, with the whipsaw action at 2:15 pm – 2:30 pm is something to take note of. This is usually does not happen, but when it does it gives us an opportunity to see a clearer pivot point in stocks. Let me explain: in a very very short period of time (about 10 minutes), the Dow shot up 40+ points at 2:15, then down 80 points, then back up 40 points (I’m rounding here for simplification). In other words our net movement in the Dow after the Fed announcement was zero! So what just happened? The powerful imbalance in stock price actually shook off a lot of the “weak holders”, long or short, and some eventually jumped back on. So what can we make out of all this? Well, pick any stock affected by the sharp movement; the apex of the stock is your resistance, and the bottom is your floor… this information was given to you in a matter of minutes! Usually, we have to wait for days to see some kind of short term pivot points. So here’s what I’ll be doing- if the stock rises above the apex, go long; if it falls below the floor, go short.
Here are some good examples:
Anyway, with the whipsaw action at 2:15 pm – 2:30 pm is something to take note of. This is usually does not happen, but when it does it gives us an opportunity to see a clearer pivot point in stocks. Let me explain: in a very very short period of time (about 10 minutes), the Dow shot up 40+ points at 2:15, then down 80 points, then back up 40 points (I’m rounding here for simplification). In other words our net movement in the Dow after the Fed announcement was zero! So what just happened? The powerful imbalance in stock price actually shook off a lot of the “weak holders”, long or short, and some eventually jumped back on. So what can we make out of all this? Well, pick any stock affected by the sharp movement; the apex of the stock is your resistance, and the bottom is your floor… this information was given to you in a matter of minutes! Usually, we have to wait for days to see some kind of short term pivot points. So here’s what I’ll be doing- if the stock rises above the apex, go long; if it falls below the floor, go short.
Here are some good examples:
-
TIE- short at the floor of the whipsaw ($27.90) would have gave you an easy +2%.
-
GM -short
-
ILMN – short
-
STEC – long above the apex
