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04-27-14 Trade Plan
Last week was an incredibly slow week for me as I entered no new positions and trailed my stops in the energy positions I had. When I am looking to load up my portfolio with relative out performers I want there to be a good (at least semi good) looking setup taking place in the S&P, and even better in the select SPDR sector ETFs (whether long or short). The fact is that we are in a range and when price is extending to the outer bounds of that range I don't want to be getting long near the top of it or short near the bottom. This isn't a nice tight consolidation either, this is large distribution swings. That doesn't mean this is the top, the market will do what it wants (especially with QE pumping through the veins) but this is distribution Wyckoff style. On top of that there has been absolutely no recovery in the NASDAQ 100 or the Russell 2000. Both the weekly and daily charts are looking bearish. Remember the Russell 2000 is what led us higher to start 2013 rally, and could now be leading us lower.
04-20-14 Trade Plan
How quickly things can change in the equity markets. This is why you need to always be very flexible in your trading and have a plan for either direction. For me the plan was to stay away from US equity markets until the charts were a bit more healthy and focus on emerging markets, bonds, gold, oil, etc. This changed very quickly when I saw low risk long entries all across the energy sector with a very good chance that the $SPY could make small consistent rallies into the end of the week. Whether that $SPY bounce was a dead cat or not, it would be enough to set off the energy sector to the upside and it played out so beautifully. So onto next week..
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04-13-14 Trade Plan
Seems things are always exciting when the bears are in control.. and they are for now. For the first time since we were in rally mode off the Feb lows, we have a trend defined by swing highs and lows. The trend is down for now, especially in the leadership indices like the NASDAQ and Russell 2000. From a portfolio perspective I am staying away from this kind of market until we see buyers are back in control. It is also important to know what you want to be buying if the buyers do take back control and for now it is still the energy stocks as my number 1 target, then staples after that (if that isn't enough for you then utilities are strong as well). We don't know how much more selling is going to come through the market so we just have to be patient about buying the stronger sectors. For strong sectors to really perform we need the S&P backing them up with at least small, consistent rallies. Since most of the sectors are just breaking down right now I won't list out of a bunch of stocks at the end like I usually do.
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Why All The Hate?
I am seeing a trend starting to emerge of people hating on the trend following traders (see what I did there?). From my perspective there is a very simple explanation for this and thought I would just put it out there. It drives them absolutely crazy that there is a strategy out there that is irrespective of what anyone thinks. The entire way up people have been fighting this rally, shorting it, hating the people that were long, being childish about the whole situation because their emotions were completely taking over as their account diminished.
04-06-14 Trade Plan
To start, I think this title is much more fitting since all I really try to do here is explain the plan going into the next week along with some analysis. In the markets I think the feeling is the same among most traders and trend followers alike. We are all looking at the NASDAQ (leadership) thinking, "man this thing looks like toast" but then looking at the S&P (broad market) it is more along the lines of, "I'm not seeing any toast". So it is a tug of war between the two and what you should be doing while we wait it out to see what is going on is managing risk and knowing where your stops are.
Personally I am feeling like the risk of the leadership dragging down the rest of the markets is greater than the worry of missing out. Especially after we worked all week to move higher out of that range in the S&P only for the NASDAQ to take everything down with it on Friday. On top of that the QQQ traded over a 100 million shares today and we haven't seen volume like that in about 2 years, so shorts are looking at that feeling confident having a stop loss above today's high or right around $90. Something else I want to mention about the S&P is that it is really getting sloppy up here. Instead of a nice clean consolidation we are getting these wide swings back and forth and sellers are selling with good velocity, this is not a sign of bullish consolidation even if we haven't breached the key swing low. With all that said, anticipating either direction is what needs to be done.
Personally I am feeling like the risk of the leadership dragging down the rest of the markets is greater than the worry of missing out. Especially after we worked all week to move higher out of that range in the S&P only for the NASDAQ to take everything down with it on Friday. On top of that the QQQ traded over a 100 million shares today and we haven't seen volume like that in about 2 years, so shorts are looking at that feeling confident having a stop loss above today's high or right around $90. Something else I want to mention about the S&P is that it is really getting sloppy up here. Instead of a nice clean consolidation we are getting these wide swings back and forth and sellers are selling with good velocity, this is not a sign of bullish consolidation even if we haven't breached the key swing low. With all that said, anticipating either direction is what needs to be done.