Just another manic Monday on wall street. Oil prices continue to be the master leading the stock market dog. With New York Crude Oil Futures Prices at new highs yet again the equity markets started off soft, but around noon the price of Crude Fell $2.00 per barrel. This sparked a rally in equities that continued into the close. The S&P500 ended the day up 5.82 points to 1114.02, while the NASDAQ Composite gained 25.02 (1.3%) to close at 1,936.52. Volume on the NASDAQ decreased 8% to 1.51 billion shares, while NYSE volume was up 17% to 1.37 billion shares. Advancing Issues barely edged out declining issues, while Jeff Semmels Tradingscans.com shows us 68 new one month highs with 106 one month lows. This is showing us that momentum is still on the downside. I still have mixed feelings about the market right now. In the short term I really think that trying to trade much right now is down right stupid. Let me say it again, if you are really active right now you are not trading, you are gambling with yours and your families future. With the elections coming up in two weeks, oil and other commodities leading the market and the heart of earnings season kicking in here you just really donât have much of an edge in the market right now. There is a lot of uncertainty, too much for me to commit heavily. So, let me say it one more time in case you missed the point: If you are trying to commit heavily right now, if you are trading actively right now, you are doing yourself no favor. You are making your broker a rich man, but you are on the wrong side of the risk to reward equation on Wall Street. You are, as Jesse Livermoore so eloquently described so many, âA Wall Street Suckerâ.
Wow, what a day. I want to start off by tooting my own horn. This weekend I said to you that I was no longer bullish the commodity related groups. I¡¦m probably the only person you¡¦ve heard who would go against the Wall Street Wisdom and tell you that top was in for that group. Here we are only a couple days later and look out below. Stocks like STLD, X, STTX, RESC and PD have been taken out back and hit behind the ear with a lead pipe. Each of these are names I mentioned as potential shorting opportunities. Sometimes I impress even myself. ƺ So to the markets: I hate to say I told you so, but, again I told you so. Just last night in the commentary I said the market is getting harder, there isn¡¦t easy money to be had on Wall Street right now and the best thing over all is to play cautious. Again, I hate to say I told you so, but I did. Right now there are problems in the DOW. There are too many Drug Stocks which are just getting killed, but even beyond that with the economy NOT GROWING, I don¡¦t care what the liars in Washington are saying (and both sides are liars, I¡¦m not being partisan here) the DOW is the worst place to be. These are old established names. They have all had their day in the sun, and unless we are going to become the United States of Dow Chemical or the United States of Exxon Mobil, Inc Etc. these companies do not have the potential to grow at this time. The main drivers of growth in any company are two fold, growing profits and P/E expansion. Well, as I said already these companies own just about everything and its very hard to grow, and as for PE expansion, everyone and their neighbors dog already owns them, you are not going to see that, especially as we look down the barrel of a recession. I¡¦m not even going to really talk about the market¡¦s internals and what it did today. It was just ugly. It was in fact the ugliest type of action we can see. We opened up very well on ¡§Good News¡¨ on the earnings and oil front (obviously it wasn¡¦t that ¡§good¡¨ or we would have ended higher) and then we sold off hard all day. Not only did we sell off hard, we did it on expanding volume. This isn¡¦t Joe Six Pack selling stocks, it¡¦s the big boys. The same ones who are on TV LYING THROUGH THEIR TEETH telling you everything is ok and to buy stock. This is the seventh inning stretch of the bull market. Be ready. Now, going forward what to do what to do. Well, for the most part what I said last night still applies. I will repeat it, because its worth repeating: In the short term I really think that trying to trade much right now is down right stupid. Let me say it again, if you are really active right now you are not trading, you are gambling with yours and your families future. With the elections coming up in two weeks, oil and other commodities leading the market and the heart of earnings season kicking in here you just really don¡¦t have much of an edge in the market right now. There is a lot of uncertainty, too much for me to commit heavily. So, let me say it one more time in case you missed the point: If you are trying to commit heavily right now, if you are trading actively right now, you are doing yourself no favor. You are making your broker a rich man, but you are on the wrong side of the risk to reward equation on Wall Street. You are, as Jesse Livermoore so eloquently described so many, ¡§A Wall Street Sucker¡¨. Does all of this mean that the market wont go higher? Nope. It could reverse and go higher and hit new highs in a month or even a few weeks. The problem is that it could easily continue lower as well. There is no clear cut trade right now. PROTECT YOUR CAPITAL TO LIVE AND FIGHT ANOTHER DAY. Brandon
Brandon, great thread. I especially like your previous explanantion of price and volume.. So many people talk about it, but dont elaborate.. I might have missed it in an earlier post, but how long are you holding these trades for, for the most part? thanks, Matt
Typically a few days to weeks. There are some other things I hold for a very long time, but they tend to not have much volume so I dont talk about them in public or private much. Brandon
What to say, what to say? Looking at the intraday action I was prepared to basically rewrite what I have been writing for the last few days. The excess market volatility right now is very high, and this is the type of action we see in very skittish markets. I was going to go on about this theme but then someone told me Iâm starting to sound boring and like a crusty old man. So, we canât have that. Something positive, something, anything: Well, the AMEX Composite closed at a new ALL TIME HIGH. See, Iâm looking for the bright stuff too. On Wednesday the SP500 gained a whopping 0.43 points to close at 1,103,66. NYSE volume declined 3% to 1.68billion shares. Over on the Nasdaq the Composite gained 10.07 which had it closing at 1932.97. Volume decreased 4% at 1.65billion shares. Not too much really to go on with these numbers. We just have the excess volatility which is driving me crazy. Some stocks to look at: HTLD broke out very strongly today. I was researching the company and found out its headquarters is in Iowa City, Iowa which is of course where Toni and I just moved from. I then decided to look further into the company and found out the CEO is the richest guy in Iowa and he was almost my neighbor since when Toni and I where looking at houses we had looked at some in Iowa, and we looked at one that is in the same neighborhood he is in. Small world, at any rate, the stock broke out of a very solid base. Someone asked me today with what Iâm saying, doom and gloom and all, why is it that the Transports continue to move more goods and are generally kicking some serious butt. The honest reply: Beats the heck out of me. Other stocks of interest include GWR, SMXC, ALEX, PATR, AMED, GTIV as longs and perhaps the MDY and PCAR as shorts. You should notice a theme in those long stocks. Good trading.
On Thursday the S&P500 gained 2.83 points to close at 1,106.49. Volume on the NYSE decreased by 1% to 1.66 billion shares. Over on the Nasdaq volume swelled by 18% to 1.98 billion shares and we saw the Composite increase by 20.65 points to close at 1,953.62. Jeff Semmelâs Tradingscans.com showed 139 new monthly highs and 87 monthly lows, a major improvement on this ratio. Much, maybe even most, of the action over on the Nasdaq had to do with Pre-Google excitement. That is to say, people where bidding up stock in anticipation of great news from Google. After hours the stock reported some rather disappointing numbers, but by the time all was said and done it was up $10. The best thing to do is let the market decide if the news is positive or negative after a few days, too many people lose too much money fighting what is happening. Going forward, I hate to bust up the party here, but Iâm still cautious. I know I sound like a grumpy old man but there is just no reason to be heavily involved in the market at this time that I can see. Volume has been increasing this week and we are seeing some solid action, this is a âgood signâ. However, for me there is still a lot of risk, particularly with the elections. Both sides have lawyers and political slickers at the ready to try and steal the election from the other and make the United States look like any other Banana Republic. Iâll try not to talk too much about what a shame it is that both sides care much more about having power than they do about what is best for America, but in the mean time I do not see there to be a favorable risk to reward balance at this time. Sorry. I have continued to play some of the setups as they come along, but Iâm doing it with a smaller commitment. I got into CACC the other day and ARTI today. But ultimately, nothing I am doing is going to have any major effect on my performance. That is the key to long term success in my opinion, knowing when the odds are in your favor and pressing it, and knowing when they really are not and sitting back to let things unfold. Good trading.
This evenings commentary will be short. I spent over 40 hours scanning this weekend and was able to come up with three names, all but one of them very low volume. As I write this commentary (Sunday Evening) the Nikki is having a very rough day open, but not nearly as rough as the dollar. For those of us in the Real Time Trading Room who have been the EC since the 8th that isnât so bad, but in the bigger picture it is not a good thing. The Overnight US futures marketâs are down a decent amount for it being so early/late, but not anything spectacular either. Again, Iâm just very glad to be in my chicken stance. Fridays action showed why I have been adapting the most cautious stance I have had in 5 years. On Thursday the market moved sharply higher, only to have The October Grinch come and take it all back, and then some. This type of action will steal your money and your confidence if you let it. Sometimes just not losing is a victory, and this is one of those times. It is worth watching the dollar very closely. It is getting to a critical juncture that something needs to be done. If something is not Oil will see $70 per barrel and the effects of the weak dollar will start to infect the world wide economy in a negative fashion. The only volume stock I have of any real interest right now is CNCT which I have been watching for months.
The major indexes spent the majority of the morning slightly negative, but managed to finished more or less unchanged from Friday. Yesterdays Nasdaq volume decreased 9% to 1.59 billion shares, while NYSE volume decreased 6% to 1.37 billion shares traded. The Nasdaq Composite lost 1.1 and closed at 1,914.04 while the broader S&P500 decreased by 0.94 points to close at 1,094.8. Of note is that the Mid Cap and Small Cap indexes both showed significantly more strength than the bigger cap indexes. Also of note is that the Nasdaq 100 formed an NR7 in yesterdays trade. This is a volatility coiling pattern that is often seen before explosive directional moves. Jeff Semmelâs Tradingscans.com is tracking 46 1 month highs and 140 one month lows. The momentum on this number is still negative. When Technical Analysis is back tested one of the most robust of all indicators is relative strength. Relative Strength (RS) is simply a gauge of how one stock or group of stocks is doing versus the general market. Down markets provide some of the best opportunities to look for relative strength leaders. In general those stocks that had been relative strength leaders as a market pulls back will continue to be relative strength leaders when the market moves up. One big cap stock which has recently been showing a lot of relative strength is Apple Computer (AAPL). In addition to the superior relative strength the stock has over the last five days been forming narrow trading ranges. So, you have a coil and a leadership stock. Be watching AAPL over the next several days for an explosive move to the upside on a breakout. We continue to experience one of the most treacherous markets I have ever seen. The whipsaw action has many professions scratching their heads and wishing they were in cash. I continue to favor a heavy cash position, and mixed long and shorts if you are in the market. While the mixed position does limit upside, it also limits your downside and overall volatility. In times where the market is not ideally suited for your style of trading protecting your capital and your confidence is critical. Again due to the market I do not have many stocks that I am watching, but there are a couple of interest. As buys AAPL, CNCT and CACC have attractive charts and superior fundamentals. On the short side SNDK and CECO stand out. Good Trading
Great thread Brandon. Can you elaborate on your experience? No specifics just products you have traded and ball park tenure.