Roller Coasters At the Cross Road

I’ve been wearing a bearish hat since the latter half of May.  It wasn’t all that comfortable because during this whole month of May the market really did look like it was just flagging and getting ready for the next leg up at any time.   There are many cross currents of indicators, marco news, and blogging site calls that constantly sway me into both the bear and bull camps.  It’s really easy to lose faith especially when you’re fighting against the Fed (QE2) and with the market making big statements like yesterday.

Yesterday, the market finally broke out the “bullish wedge”.  Not only did it take out the 20 MA on the daily chart, but also closed it off with a long tailed hammer.   Just about ALL of the blogs that I follow celebrated by turning on the buy signals.  Even the ultra conservative theinformedtrader.com started two long positions (IFF and IBM), forgoing the 100% cash position.

I was rather despondent to be honest, feeling sick in my stomach.  As not only have I been selling my long positions lately, but I’ve been accumulating TZA, the triple bear ETF for the small caps.   Even though I was telling myself to be prepared to hold ground in case the market retests the recent highs, it was very hard to hold on to the faith because the landscape seemed to be changing.  On top of that, I was kicking myself for being greedy and not cashing in the 7% gain in TZA just before yesterday, only to turn into -6% in one day.

This morning, the disastrous ADP job report turned the market upside down yet again.  All of the sudden, the outlook for the market reversed.  The market gapped down and never looked back, losing the 20 MA, 50 MA, the trend line support, and two gap supports along the way, with 28% more volume than yesterday.  Quite a feat to say the least.

The financials, the sole long time laggard of all sectors, got decimated.  It even lost the 200 MA, making a new 5 month low.

Even though my existing few long positions lost grounds (especially AONE, urgh!), the 9.4% gain in TZA today has turned my positions positive to over 3%.  I do feel a bit vindicated for the time being.

Now the market still hasn’t lost the critical 1315 support or breaking any long term trend, and the market is severely oversold.  Will it bounce?  With the market being so volatile and major macro news abound, who knows what will happen tomorrow.  The daily has been a sell but the weekly has been a buy but with a negative oscillator divergence as a big eye sore.  Yesterday, the daily finally turned bullish but the bull got run over by a freight train just a day later.   It’s never easy.

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