Market Analysis – Bobby's Trade Journal

Untradeable Markets

Are the markets becoming untradeable? Everytime I hear pro traders and everytime I talk to others who trade on a daily basis, I hear sentiments such as, “it’s too unpredictable” or “this market is on no volume”, etc.

The market has had low volume, rally mode days, and a whole lot of shaking out stops. Some days the market rallies 100 pts, in the first 30 minutes then hold steady without volume the rest of the day. On some other days, it moves up and down during the day but closes the day almost where it started. In other words, it is getting hard to use technical analysis on many charts. It’s not impossible, but hard.

Consider AIG, it keeps moving up for no reason. Or consider GS. It keeps upgrading stocks to random buys. What is the point? What could google have changed in the last 4 months that GS would think it’s a buy?

Despite all these things, the main thing for a trader is to trade the oppurtunity. If the oppurtunity is for intraday, then trade intraday. If the oppurtunity is for swing trading, swing trade.

Pullback or Rally

The current market is drawing out two strong opinions from the trading and investing group. Some say that it has run up so much, it simply must pullback before further continuation. These are the shorts. They hoping for a short and lower prices before they join the upward leg. The second group is the people who say that market momentum is such that it will continue upwards, no correction necessary.

To confuse the issue more, some expert say this is the bottom, it will go up from here. Other experts say that the market definitely fall lower during the year later on with or without upward move.

One thing is for certain more analysts are joining the upwards move camp with each week.

In the middle of all this where do the normal traders, swing traders stand? It seems necessary to know for the trader, when swing trading, whether the market is headed up or low, so they can trade the right side. It’s easy to tell them, just go with the flow. But if there’s a moderate pullback day such as 100pts down, that trader will lose lot of money betting on the wrong side of the securities. It’s hard to really predict. Unfortunately, many experts have been saying that it’s really hard to determine the direction. They say it could go either way. But the investors and traders are watching the prices rise everyday a little more and good oppurtunities are going.

Hopefully, a clear direction will emerge. At the time of this writing, I’m slightly bullish. In other words, I have a bullish position on one stock. I’m not against taking bearish position on other stocks at the same time. Even when the stock is big and moves with the indexes.

Dow Analysis – One Last Time Till Next Year

So let’s see what the DOW has been doing. It’s been sort of going up and down which is somewhat usual. But it seems to be forming patterns breaking either to the upside or the downside. This is confusing for a regular technical analysis using trader. Not only that but it is confusing for the investors. Investors can’t decide if these are the best price or if it will get better. Traders can’t decide if it will go up or down. Without all of this, you’ll see uncertainty and restlessness in the markets. Which is the usual activity lately.

For the DOW, big support around 8300. Big resistance at 8900. Likely direction is down. Even tho, this is after the fact since we’ve had one more trading day since I did this analysis. And today’s action was lower. But this is the analysis that I had done on 19th.

Short term stochs diverging down. MACD still in higher highs mode while index is in same highs which is not higher highs. The RSI has been also flat in the highs. This is fairly confusing. Not a trade worthy environment. I will lay off until the next year.

I may monitor the markets and if I see something really interesting, I may invest or trade a little. But for the most part, I will wait until the new year.

Also let’s see the Fib’s on the DOW.

So This Wasn’t a Real Moving Day

Not much happened. In main news, the GS and MS earnings were bad and the market decided to rally anyway. Those two stocks gained big gains anyway. Now what? Maybe some relief on those? I’m holding one GS 55 call. It’s at 78.

Anyway, the DOW is no longer going in a descending triangle only. On a smaller timeframe there’s an ascending triangle, as well. 8950 will be the main resistance point. There has been 4 days of touching that line. Two opening from that point and two closing at that line. Slightly below average volume. Mostly decent volume activity. RSI is over 50. MACD heading up. Stochs pointing up.

This is the Expiration week for options. That might help with sudden moves. It might yet fall considerably on Friday. It migth simply keep going up. This market has been very unpredictable in the many moves.

And market recap for indices.

That Was Totally Uncalled For!

Well, it wasn’t so much uncalled for, as it was unexpected! It’s just odd. GS reported $2 billion loss and first loss ever since going public. What was the market response? It just pumped the stock up. The stock just went up $9.54 (14.35%). That’s just unexpected. Oh well, it is supposed to retrace a little tomorrow.

Additionally, looking at the DOW, another higher low has been put in. This market has been pretty well desensitized to “negative” news in the financial sectors. Wall street messed up! Banks made big boo-boos. Auto makers have been doing the same ole same ole for a good while. And a 8 year old shot his grandmother. Well, not really, but after a while people get tired of just constant “negative” news. People will eventually step up and say that they don’t care they’ll just buy something at these prices and hold. And more investors will start coming out of the woodworks. Let’s see the DOW chart.

We’ve started and ended from and at the 8550 level for 2 days each for a total of 4 days showing good support on that level. Hopefully, it will hold. If not, the 8380 level will show good support. Notice strong down days only have fewer candles. And if there’s more, they’re smaller. Up days have been nice and big candles lately. That should mean good news. Should being the operative word here.

Let’s see the 300+ pointer day. It was something that wasn’t expected. Otherwise, I would have gotten some calls on something. Or puts on SRS. Currently, I’m holding one BAC put and one AAPL put. Both are unprofitable.

Is This Another Down Week?

Let’s see, the DOW didn’t do any dramatic thing. Down 65 points. The volume is decreasing. A previous down line was broken on 8th of December and the candles has been above that line. A new trend line is holding. The DOW is between 50MA and 20MA. It has been bouncing off the 50MA for a while now. And it has stayed above 20MA for a good 6 days. Could this mean a possible reversal? Or a consolidation before falling below. If it move down, it would probably easily go around 8380 line and stay. If it breaks more, it might go to 8180. But more down move doens’t seem very likely. It might go up a little, then make a down leg.

With the options expiring this week, it becomes very important to know and understand and predict correctly which way the DOW will move. Some moves might be over amplified. For example, today’s end of day spike was very noticeable and inexplicable. No news around the time. I looked online to see if there was some announcement but nothing.

It might continue down tomorrow, move up Wednesday and then down the rest of the week. That’s a wild guess and anybody who has monitored the market long enough knows there is simply no way to predict the moves. The best we can do it is:

To be ready for the move.
To recognize it.
To use the short term trend and make money.
To have funds available to play.

And today’s market recap.

Friday’s Small Rally

So Friday was a down day for the most part. And then towards the end it gavea surprise and closed green. From a daily chart point of view, that shows a green day but it doesn’t show that the entire day the erratic behavior was favoring a red close. In the end it was green, and to some people that might be the only important item of note.

At this point, that chart just looks too confusing to me. I can’t figure out what it would really do. To be honest, the market has fallen a lot and it would only mean that it should slowly go up. Even if the economy were to go in a recesion (and it’s not in a recession at this point), the markets wouldn’t continue to fall at the astronomical rates that were seen in Sep. – Oct. period. It would be much slower decline in prices and that would mean business as usual for traders. Why is that? When the market settles in a trend, just as it was in an uptrend before the recent fall, it will continue in a direction with the normal ups an downs. The traders would normally use those up/down moves for trading. The investors would then start their investing buys at this low prices. The investors that have already bought will simply average down little.

However, a more likely scenario is that the market will teeter around this point for a little bit and then continue slow uptrend. That’s the scenario that I am currently, envisioning.

Let’s look at the DOW for two years. From a technical point of view, one could say that it fell, went back to Fibbo retracement, and should continue to fall. However, that would be the case absent any fundamental analysis. Fundamentally, the market cannot simply go to 0. That would mean the same thing that it would in case of a stock – the stock is worthless. The entire economy going worthless sounds a little dramatic. So then are we seeing a bottom yet? No one can tell for sure, but one of my previous post shows that some investors are starting to see the bottom.

Thursday’s Performance

Let’s take a look at Thursday’s performance.

So the red candle broke below that up trend line. That would be bearish. It came close to resistance around 8380 that was identified in my previous post. This was bearish but not too bearish. It didn’t break below that line. Volume is also on a downtrend. RSI is 48. MACD is uptrending.

DOW Analysis – A Non Rally

So today’s close was a pretty small green close. It was up and down during the day. In the end, it closed green. However, it’s riding into the wedge corner. It’s going to have to break up or down.

The down trend line (blue) is holding. The up trend line (blue) is holding. Tomorrow should break out of the almost symmetrical triangle. If it breaks up, then it will have to break thru and closed above 8950 level to be bullish. If it breaks below the ascending trendline, it will probably head down to 8380 support line. If it heads down, it will also be possible to break below the other support lines. It will need multiple days to do that.

In the short term, it would appear the path of least resistance is down. Mainly, because the bailout should be announced by tomorrow. Once it’s announced, the market will probably closed red as the bailout was seemingly already priced in.

In other technical analysis, the price touched 50 SMA, didn’t cross it. It would seem to go down from here.

Volume was low today. Mostly, because the bailout announcement is going to help the next buy of sell frenzy in the next few days.

Red Tuesday – Has The Uptrend Stopped?

Has the uptrend stopped? No. It isn’t confirmed in the first palce. There’s signs of uptrend starting. But until confirmation, it isn’t an uptrend. There’s a reverse head and shoulders patterns unfolding. If it forms correctly, then it might give an indication of an uptrend.

Looking at DOW today, the down trendline has been broken by the candle yesterday and today’s candle stopped above it. It also broke the resistance/support line that it broke yesterday and thus that line is no longer a support at 8850.

The uptrend line of the ascending triangle shown in blue is holding ok so far. If tomorrow’s candle breaks below 8640 and or the bottom blue trend line (from lows), then it might short-term go to 8160. If it holds above that line, it will have to close either in the red by few points or green.

Many of my charts are drawn each day so the lines are almost in the same place. However, the numbers might be slightly off. With the numbers being in 8000 range, it doesn’t matter for the number to be off by 50 or so points.

And the market recap.