Stock Up For Winter
It is hard to believe that we are in the middle of
July and getting this type of volatility. I
have not traded a summer like this since 1998 in the midst of the debacle
created by Long Term Capital Management. This time we just have a
different catalyst. Traders/investors are sick and tired of all the nonsense on
Wall Street. Every day brings more negative news, today it was courtesy of the
Bank Stocks. So, while the fun lasts from a trading perspective, make sure you
stock up for winter, so to speak. The next phase of the market will likely be a
bit more subdued. Given the litigious nature of our country, if there are some
publicly traded law firms specializing in financial class action suits, you may
want to consider an investment there. I suspect a lot more finger pointing is
just around the corner.Â
I have received several questions lately on how I am
playing this market intraday. Other than the fact that I am being very assertive
and doubling and tripling my share size on a per trade basis, I have to tell
you, I am trading in the simplest and raw form possible. The market right now is
trading on a combination of technicals and emotions, with a heavier weighting
towards emotion. In this type of an environment, you cannot possibly mechanize
your trading approach. You should have only two thoughts going through your mind
intraday while looking at your one- and five-minute charts:
“Gee, it looks like the market is going to
trade a bit higher here, I am a buyer.”
“Well, it looks like they are going to roll
this market over here, I am a seller.”
Naturally, I am over-simplifying, but it not that far
from the way I trade each day anyway. Remember, the market does not trade on
technicals, but it certainly uses them to identify potential areas where people
will react, and that is what trading is all about, how people react. And right
now emotions are on high alert, and every single move feeds on itself and goes
further than would normally be the case. So, going back to the above comments,
if I see a pullback to a 20-period moving average on the stock I am trading, as
well as the futures, and suddenly they start to spurt higher, I am in — period.
Sure I may be the first guy at the post wanting to buy stock, which can be a bit
unsettling, but suddenly it appears that everyone else sees what I saw just
seconds before. Suddenly the offer you just bought becomes the bid. That is the
epitome of a good trade.
If you are sitting there waiting for everything to just
fall into place, you might miss the majority of the move. In the current
environment it is even more true. Sure you can get in late and still expect to
make some money simply because the range is pretty good currently, but waiting
for everyone else to confirm that the trade is valid is not the way to maximize
your potential.
Given the range of the market, the intraday swing
trades have been playing out well also. I trust many of you caught the short in Goldman
Sachs
(
GS |
Quote |
Chart |
News |
PowerRating) yesterday, the trigger was a
print below $71.51. I was stopped out for a nice gain, but was able to
reestablish later in the day for the continuation move down. I did not come
across a lot of really solid setups for today. However, if I come across some
intraday, I will do my best to make them known in TradersWire.
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| 837.40 | 952 |
| 824 | 941 |
| 817 | 928-30 |
| 809-12 | 919 |
| 796 | 900.50 |
| 783 | 874 |
| 768 | 851 |
| 761 | 839 |
| 740.50 |
So, with the futures indicated down again by a good
margin, hold on and take advantage. Be on the lookout for potential reversals
off the opening prints which may be potentially very profitable. This is a
common tactic on gap down days.
As always, feel free to send me your comments and
questions. See you in TradersWire.