just wondering what people here use to determine to be long or short the market in general. i'm not really talking about intraday trading. for example, if you're a swing trader, what method do you use to decide to have a lot of long or short positions? do you use moving averages for say nasdaq and if bullish, go long some nasdaq stocks? right now the market is downtrending, so it pays to short stocks...but at what point will you shorters primarily go long?
For short term trading (intraday to a few days) I like using the weekly chart of the NASD or NYSE and bias to the short side when the current week is below the low of the previous week and vice versa for the long side. I still go long against the trend in an oversold condition, but in smaller shares when the weekly trend is down. I step up the shares going short in a market like this.
Eng, in his book of trading rules, I forget the name, uses a simple illustration to point out the advantage of trading with the trend. If you look at any daily chart you will have no problem seeing what the trend is. I can only remember making two long trades in the last couple of months and they both turned out badly.
I play contratrend bounces. Since the market has been in a solid downtrend, I've traded almost only to the long side. I've made 2 shorts all month I think. One was a qqq scalp, and the other was shorting like 10k of invn at 10 avg on the day of the gap up. I've not been having much success really as it's kinda rare for markets to decline 20% in a week without significant bounces. I'm quite happy to now be flat this month after my second best day ever today. When the markets bounce, I'll sell my longs, and then reverse short obviously. Your own system will tell you what way to play the markets.