Note: I have a meeting tomorrow morning so there probably won't be a watchlist.
The action today was a little bit better if you were willing to go short. The indices fell to the bottom of their recent trading ranges on a slight increase in volume. So the bears win this round of the tug-of-war but I don't think they should get too excited yet. I have a feeling that today was nothing but a buyer's strike ahead of the Fed meeting. I linked to an article earlier today that sums up my feelings about this market pretty well:
Here's this week's trading schedule as I see it: Monday -- nothing happened. Tuesday -- Nothing will happen. Wednesday -- nothing will happen. Thursday -- nothing will happen until 2:15, after which time I expect to see a sharp reaction to whatever the Fed says and does. If the reaction to the Fed is positive, I would also expect to see strong follow-though on Friday as institutions try and make their 1st half numbers look as good as possible. I would expect this good feeling may last a few days with the July 4th holiday next week. I would also expect a rally of this type may suck enough people in and fool enough participants that it could lead to the next leg down.I heard many traders remark lately that they have been forced to the sidelines. Being out of the market makes some traders antsy since they are afraid of missing something should the market move. Traders whose strategies have them largely on the sideline should understand that cash IS a position. Over the last couple of years this asset has appreciated greatly in value. Short-term interest rates are now closer to 5% than 1% and likely to get upped a little more later this week. It always pays to be patient when trading, and these days it pays a little more. If you don't have an edge, don't trade.
One area in which the bears clearly have the upper hand is the semis, which got crushed today and closed at a new 8-month low. But I still wouldn't be too aggressive in that sector ahead of the Fed meeting...
Since all the indices closed under their 10-day moving averages I've switched the short-term trends to 'down'. They could easily be 'lateral', depending on how you look at it since the indices are still range-bound.
| Trend | Nasdaq | S&P 500 | Russell 2000 |
| Primary | Down | LA | LA |
| Intermediate | Down | Down | Down |
| Short-term | Down(-) | Down(-) | Down(-) |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
LA Indicates a Lateral trend
This upcoming Friday is the annual Russell rebalancing. I remember last year there was a big drop in price on the indexes and big uptick in volume right at the end of the day with wild price swings in some individual stocks. Just something extra to add to the mix.
Very good assessment. Yes, yesterday was almost an impossible trading day (at least for me). But, today was a very good trading day for bears.
I did well with my shorts in play: HANS and TIE. But, once TIE got to 31, it did not want to close below it as that has been its recent firm support. However, it has again broken through its year-old uptrend line. It first gapped through it two weeks ago. But, the market rallied big and it couldn't refuse. I like TIE because it is highly liquid with tight spreads and it has huge moves that often play off of intraday trendlines and pivot points.
HANS plays a bit trickier - wider spreads, more head fakes. And long-term, HANS just has to fll huge, don't you think?
Bumby, good point. I don't know how to play the rebalancing but it's certainly something to keep in mind.
Jocko - I agree with you on how HANS and TIE trade. That's why TIE is one of my favorite shorts and why I don't mess with HANS. But what hughe gap are you talking about? I don't see an unfilled gap nearby
Oh, I think you are referring to my last sentence regarding HANS? That's not what I meant. I kinda botched want I was trying to say. What I meant to say was:
--
HANS plays a bit trickier - wider spreads, more head fakes. But, long-term, HANS just has to fall huge, don't you think?
--
Damn sticky keyboard :)
HANS has risen just so much this year. Yes, it has good fundies, but if we are indeed commencing upon a bear market, those fundies can be thrown out the window for a while.
It doesn't *have* to fall. There could simply be enough bears in there to keep it afloat as they have to keep covering and new bears jump on board.
Yes the bears are in control now, but are we due for a rally. I think the probabilities increase every day. There are many market indicators that show we are as oversold as the bottoms in 2004 and 2005. The reasons are too many to list out in a comment, but if you want to read why click on the link to the full report.
http://chartreader.typepad.com/technical_analysis/2006/06/is_the_market_n.html#more
For those who understand HANS.....we all got rich as it announced the 4-1 split....I made about 4,000,000....then on friday before the split, you had to sell the stock because it now looks like 50 dollars per share rather than 200. So many people don't know how or when to buy or sell, but if you watch the announcements, and see what day you have to be the holder, that is the day to buy and then the day before the split - SELL....that way you can reinvest and make even more! HANS is the best stock!