Nothing has radically changed. I am still short financials and will be looking to add more. We are still forming a small multi-day continuation flag. As for today itself, we formed a doji, or indecision day, but it's not a major reversal pattern due to the lack of accompanying volume. It looks more like a continuation to the downside. As a swing trader, I could care less about intra-day moves unless something major happens - all of which seem to occur after 3PM.
At approximately 1PM, I even mentioned that it was going to be a doji day (on Twitter). My obsession with doji is the fact that it's one of the most highly predictable intra-day patterns. Just fyi, doji days are the worst days to be day trading, so don't. They are the best to enter swing trades, so please do.
Bill Miller needs to stop calling bottoms. We are a ball sac hair away from touching the DJIA November lows. What's he going to do? Call a 3rd bottom? lol. Birinyi also called a bottom [I uploaded their report here]. Listen up people, stop calling these bottoms! The Bill Miller bottom is about to be tested and I'm not sure if it'll hold. There is too much bullish sentiment still lingering.
In addition to financials, the REITs are also great shorts.
You must look at Gio's post on the LOL pattern. It is the failed WTF pattern! When the clock hits 3:00PM, the market turns into the Wild Wild West. Anything goes.
We have some major technical problems. Swing traders may initiate scaled-in short positions with more favorable risk/reward this week. I mentioned in a previous post that the market was flagging with a bias to the downside. I also mentioned that the market was churning either at (COMP) or below (SPX) the 50-day MA which was "technically extremely bearish". This is the end result. I refused to take any 3-day weekend risk, so I was unable to bask in this glory with the short sellers.
The biggest danger to shorts is if the market decides to bounce off the lower bollinger band's range (797.30) like it did back in mid-January. The safest entries would be to short on the initial breakdowns of any rallies from here and to scale-in positions. Unfortunately for bulls, the only things that kept the market propped up were gov't statements, rumors from Charlie, banking CEOs buying up their own worthless stock, etc. There is no substance in these sorts of things, you know, when the entire world is about to blow up. The fundamentals are so shitty that even a technician pays attention.
Although volume was a bit weak today, if/when we get additional down days, the volume should increase and the candles O-C ranges should get larger. I want to see a real sell off and a lot of intra-day activity. I can't tell you how bored I am these days watching the lack of trading taking place. I know you're bored out of your mind too. What do I expect? A healthy environment for short-side swing traders to initiate positions this entire week. The BKX (Bank Index) is at an ALL-TIME low and about to get even lower. The financials are the biggest money makers.
Keep a close eye on Eastern Europe and other emerging markets. Some of these countries are in serious danger of defaulting. We are also on the brink of economic disaster. If shit hits the fan, I will purchase a dairy flat in New Zealand. In the very end, we will all be bartering goods and services anyway. I hope I'm kidding.
I am back from taking a full week long break. I think all the negative news was starting to get to me. When you wake up in the morning and read the WSJ and IBD, you mostly find bad news. When you turn on CNBC, you find more bad news. Finally, while reading your favorite blogs, you come across even more bad news. I had to stop that news flow for a few days and just get away from it all. I am back this week to resume my regular trading activities.
Take a look at the SPX and COMP below:
We are in long-term symmetrical triangles. What the market is figuring out right now is whether it wants to go up 20%+ or down 20%+. Ultimately, I do believe we head lower, but not before some major whipsaw to flush out more traders. In the short-term, you can see that the market is forming a multi-week flag. On the SPX, it is between 800-870. On the COMP, it is between 1430-1600. I don't even bother using the DJIA anymore as it is skewed quite a bit.
One important thing to note is the 50-day MA. Currently, the SPX is trading below it while the COMP is churning above and below it. Both are technically extremely bearish. Take a look at the REITs as the vast majority of them are either breaking down or setting up for a break down. This is in addition to my favorite sector (financials).
