Having some difficulty posting charts tonight so I’m just going to talk about what went down today and remember this is coming from the perspective of somebody who doesn’t watch the news, CNBC, or any of those other distractions. Oh, and one of my computers crashed again today so I was only running with one computer, but that was Ok, because I didn’t trade much today and considering it’s a new computer, I didn’t lose any data.

It’s amazing how big declines have no effect on you when you’re not really invested in the markets. It really gives you a totally different perspective. To make things more complicated it’s either the beginning of allergy season, or I’m coming down with something because I was so drowsy yesterday and today and I couldn’t even stay awake. It seemed like I would nap, wake up, Dow off 100. Nap, wake up, Dow off 200. Later, rinse, repeat; you get the picture.

Coming into the open I was feeling slightly bullish and hopeful that we may be able to string together more than a couple wins on the indexes and ultimately get one of those 20% bear market rallies we hear so much about. After all, I had just recieved a buy signal on the markets and I was beginning to see some bullish set-ups appearing. I actually thought today’s announcements would be a catalyist for the markets to push higher, but that was just a small hopeful wish and I wasn’t making any trades based on that info.

The one dent in the armor was the CBOE options put/call ratio that I talk about a lot. It was at an area where markets typically reverse because investors are buying up the call options like hotcakes and it’s impossible for the public to be right. This isn’t an indicator that you base a whole trading plan around, but you use it in conjunction with other indicators. However this morning this indicator was off the charts and I sent an alert on twitter about 35 minutes after the open that I think the markets might be in trouble. Now at that point I exited my longs and waited to see how the market react. I didn’t want to start shorting too early and get caught in a melt up, so I thought the safest thing to do is protect my equity and exit longs for now, and take actions when the smoke cleared.

So this brings me back to my market timing system and how I may have to tweak it a bit because without fail, every time I get a buy signal, 1-2 days later the market reverses course.  It could simply be that trying to trade the counter-trend trend isn’t worth it, except for a few day trades here and there. The trend is down, has been, and looks like it wants to continue in that direction and going long is just a time bomb waiting to happen. Not that I’ve been hurt by going long, but on days like today you can get taken to the woodshed if you held a number of longs in your portfolio. I just may trade the short signals and move to cash when I get a buy signal on the markets. Think about it. In a raging bull market one wouldn’t be trying to short every little pullback. If anybody doesn’t think this is a raging bear market then they’re in denial. No time in history has government intervention saved the financial markets. Why would it work this time?

Last week I was turning more bearish on the markets and we had an explosive rally of hope that fizzled out essentially making me look silly. Today was a reality check with the markets disapproval of what Washington is attempting to do. Where will we go tomorrow? Your guess is as good as mine but my money is on the bears at this point as any rationale for the markets moving higher is truly a measure of hope. And you know a trading system that is consistently profitable using hope as your entry points, let me know.

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2 Responses to “Just When You Thought It Was Safe…”

  1. shlick Says:

    I think were going to let off steam for a few days. It's healthy for the market to consolidate. These pullbacks usually come in three day time periods. I call them "three black crow's". If by friday afternoon there is no rally and S&P trendlines are broken, the markets are in serious trouble.
    This is what I'm watching for this week.
    shlick

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