Trader Mike

The market has been up each of the last three days but the action doesn’t feel very bullish to me. It feels much more like a dead cat bounce. In particular the NASDAQ has risen on declining volume each day. That’s the exact opposite of what bulls want to see. I would say that the Naz is a short under yesterday’s low, but two things are keeping me from saying that. First, its proximity to the 200-day moving average (potential support) makes the risk/reward ratio poor. Secondly, like many traders, I wouldn’t want to initiate such a position ahead of tomorrow’s jobs report.

Here’s the NASDAQ chart. Note …

It was a pretty lackluster day today. The market stayed in a very narrow range and closed slightly down in lower volume. I don’t know how much effect the AMEX technical problems had today, but it probably had a little to do with the dullness. Although I was 100% long coming into today I had a pretty good day largely thanks to AVCI. (I hate that SLAB got away from me for 2 straight days now… missed about a 15% move in that puppy.) I’m beginning to see a lot of stocks that appear to be having dead cat bounces. …

Even though last week looked and felt like a great week I’m going with the thesis that this move is a dead cat bounce and an opportunity to put out some shorts. There were a lot of shooting stars made on Friday. Many of them were caused by stocks failing to hold above their middle Bollinger Band. If those stocks trade under Friday’s lows, I’d look to get short with expectations of a move back to the lower Bollinger Band. Here’s an example of the type of chart I’m seeing pop up all over the place this weekend: