Tuesday, December 2, 2008


The market is up +270 points! Oh my goodness, it's such a big day! No. It's not. +270 points is nothing. The bounce was expected.

Here's the problem: We lost 9% yesterday, the 4th largest down day in history, and we managed to gain back "only" 4% on the SPX (or 3.3% for the DJIA). I couldn't be bullish unless the market made a dramatic turn in sentiment and nearly canceled out yesterday's losses. I'll need to see another +4-5% up day tomorrow, to even give the market a chance.

The low volume, itself, is no reason to rejoice. In addition, we had another WTF pattern (but to the upside) in the last hour. Even that rally was littered with deep, irregular corrections on the way up. To be fair, today is considered a neutral or consolidation day. I hold onto positions in the direction of the prevailing trend, which means that I remain short.

Today's +270 point gain didn't bother me one bit. I'm still up +16.4% (incomparable to the +27% of yesterday) which gives me a large buffer to the volatility and, like many of you, I became numb and accustomed to the 3-9% days we seem to be getting every day. 270 point days, up or down, are no longer "big" days, they're "normal". Do you remember the times way back when 100 points was such a big deal? Those times are gone. Welcome to the world of eye-popping volatility.

My timeframe is also to swing these stocks, therefore I keep my plan in mind, unless something drastic happens tomorrow. The swings may frighten many of you, in which case, you should not trade. Many losses are incurred within a neutral trading range. Exercise some patience and discipline, or just sit on your hands and stay in cash.

Make note of the support and resistance areas for tomorrow. If the market does breakout from it's range, it becomes an uphill battle that requires some type of positive catalyst. The rally must be strong and continuous without deep sell offs. If we breakdown, that will be confirmation of retesting the lows. Either way, monitor the situation with hawk eyes.

SPX 1-day

SPX 3-day

SPX 10-day

SPX 6-month

Don't forget to try the Free Trend Analysis. It's FREE, so give it a shot!


Anonymous said...

Great stuff, John!

Anonymous said...

so when the market rockets 300 points - your next post will tell us how you went long and somehow made $100 grand because the trend is obviously up...

I'm just waiting for the old switcheroo -- I was always long post....

Anonymous said...

dude you got your faced ripped off today.


Anonymous said...

Some people don't seem to know what swing trade means.

John C. Lee said...

Byron, you probably got your faced ripped off all year.

Yes, I'd have to say that a swing trade in this environment is difficult to maintain due to the volatility.