Sunday, May 9, 2010

Market Toughts

Hopefully you all rested and relaxed a bit after last week's dramatic action. For those that got hurt by last week's crash i highly recommend you take sometime off and size up this market. Needless to say that we are entering an extremely volatile time for the markets. LOTS and LOTS of uncertainty out there and markets HATE uncertainty. Anyone who thinks we are seeing a regular correction and we are going to see new highs again soon, then you need to comeback to reality. This rally since the march 2009 lows is likely over now. Some will debate that a return of the bear market is already starting. I DO NOT KNOW that but all i know is VOLATILITY is back in a big way. So expect HUGE and WILD swings UP and DOWN.
Now, if you are a DISCIPLINED TRADER you should welcome this! All you guys who traded without stop losses, without regard to proper position sizing etc etc, well it's time to recheck these types of strategies. Bull markets forgives many mistakes, BEAR MARKETS DO NOT!

I see tons of people posting charts this weekend with oversold indicators, moving averages and chart patterns etc etc: All this is useless right now in my humble opinion!! These things will NOT help. All this stuff goes out the window when you are dealing with a post 'crash' market environment. Stocks will slice thru support and resistance zones with great ease so watching specific numbers or levels is not of great importance.

On friday, i used the term it's a "jungle"out there. Think about what i meant by that for a few minutes.

Now, just because charts do not work and it's a 'jungle" out there, doesn't mean that we cannot have good trades and get in on profitable some action. In fact, some of you will have some of their best trading days in their entire trading careers maneuvering these markets! Charts right now will not be of much help but allow the dust to settle for a few days and the charts should start to be "play-able" again.

Right now, we are "oversold" but oversold in a bearish trend doesn't mean anything. We can rally hard with a 3-4% gain on monday or we can continue to bleed away and become and more and more 'oversold'. We are going have to gauge each market day by day and adjust our trades/thoughts accordingly.

1 comment:

gamingthemarket said...

Good stuff Stewie. Here's some digging into why FAZ and other ETFs have massive hidden risks:

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