MARKET COMMENTARY (7-16-09)

As you may know, I bought CIT yesterday, and minutes later, the stock was halted pending news. Currently, the government is refusing the bailout CIT and the stock is under the very serious threat of bankruptcy. This is a 9.5% allocation.

This was a high-risk speculative play, and I lost. CIT will likely be the biggest mistake I made since I started trading in late 2002 (I never got caught in a bk co). No doubt, I am fully prepared to take a 100% loss on this position. The stock won't open at $0.00, but let's say that it does. Not only will it wipe out my entire week's gains (so far), I'll be in the red at approximately -2.2% for the week. This will also bring my YTD gains to about +198%, below the 200%+ level that I've been holding on to for a while. Who cares?

That's nothing. In fact, it doesn't bother me at all. I'll be green by the end of the week, and I know it and you know it. Everyone makes mistakes, and not a single person here is perfect. I will be the first person here to say it. The important thing is to just let it go and move on and bite the bullet like a man (or a woman, if in fact, you are a woman). And remember, taking losses is part of the business, unless your Lenny "Roofless" Dykstra.

Now, if you bought a huge position in CIT, then you are screwed. Take it as an expensive lesson in money management. Everyone is responsible for their own actions.

Moving on to the SPX, yesterday's move broke away from the descending channel. I stated in my previous post that the opening gap was enough for an intra-day breakaway gap. What's important now is IF and HOW we consolidate from such a massive move.

Below are the 2-month/60-min, 3-month/60-min, and 7-month/daily charts of the SPX with noted support and resistance levels.


Below are the SPRD Select Sector ETFs (XLV, XLB, XLP, XLI, XLU, XLY, XLI, XLF, XLE, XLK):

TODAY'S BREAKOUTS

Yes, we are in a confirmed rally, but this is only a reactionary rally. This means, enjoy the rally while it lasts before I jump on the short wagon. I am still long with a few short positions mixed in, but in 75% cash ahead of the elections. I’d rather sell out and trade the reaction than holding during the “news”.

I’m profiling breakouts and a lot of my comments may be obvious, but that’s not the point. The point is to recognize the key resistance area that will be soon approaching for 80-90% of stocks, and that is the 50-day MA. Other stocks that broke out above the 50-day will use the moving average as support. Short-term traders should take profits before resistance is hit. Watch the 50-day MA’s closely and just be cautious.

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

MY WATCH LIST

Not too many breakouts or breakdowns at all. Therefore, I chose to share a few stocks on my long and short watch list for tomorrow. These trades are mostly 1-3 day holds and are in no way long-term positions (in this market?!). Even though the market is consolidating, that doesn’t mean all stocks are in a neutral range. It just means that there’s about an equal number of stocks that are heading up and heading down. The key is to find the most reliable patterns because if a breakout of breakdown did occur, stocks “on the other side” mostly do not immediately move that way but continue in their prevailing direction for several days. This is especially true for short positions. This is why you still see a lot of breakdowns on up days…people still want to get out.

The day was volatile as usual and those who cannot stomach the volatility should be in cash until the market makes up its mind as to where the heck it wants to go from here. The whipsaw or the wild swings will only continue. The longer we consolidate, typically, the larger and more forceful the breakout or breakdown. Or, the market can just sit around in this range for a long time and do whatever it wants to do.

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