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Yesterday was a fairly good day for trading long, but today was a monster. The market shot up this morning and then based sideways this afternoon, refusing to give back its gains. What was particularly impressive was the breath of gains. You could have just about thrown a dart at a dart stock board today and picked winners. I have attached a daily chart for the Dow. I refitted a regression channel, but I couldn’t get a great fit, so I am a little wary. Still, that bar today was powerful, even more powerful than Monday’s bar because it decisively broke the downward/sideways momentum. I know I will be bullishly biased going into Monday. Will there be follow through? Will the current retrace be shallow like all the other recent ones? We’ll see. By reading the charts you’re tilting the odds in your favor, but the market can surprise, and news always rules. The way I look at it, chart reading is just a way of gauging the reaction to the news that really drives the market. Hope everyone has a great weekend. Good luck with your trading.
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Great leaping balls of red bars, Batman. The market gapped down hard today at the open. I assume it’s because of the latest threats of tariffs, but who knows. All I know is that I can’t trade this mess, so I’m sitting on my hand right now. I hate trying to day trade gaps at the open. Not my style. I just need to be patient, which is, unfortunately, not always my strongest suit, but I’m Pretty sure there will be a lot of scalp bounce (long) plays later today. This is still a tricky market to play and it’s very difficult to swing trade, but i’m doing well enough day trading, and, honestly, it feels good to be flat at the end of each day. Eventually, there might be some good opportunities to pick up some buy and hold positions, depending on how this correction plays out. The problem is still, however, that we are overdue for a sizable correction so it might be easy to be fooled about when and where we will get a true, sustainable reversal to the upside. It’s already fooled me once, but fortunately I wasn’t holding anything overnight. I’ll try and post some charts later, after I see how today plays out. Good luck all in your trading.Comment
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I was right about the bounce plays, they were everywhere and they started much earlier than I expected. It turned out to be a great day for scalping. I’m already done for the day. A couple Chinese stocks, HUYA and IQ, made for great day trading off bounces. BILI didn’t work quite as well. I actually like both IQ and HUYA for the long term, and I held IQ for a while in my retirement account, but I want the volatility in both to shake out before I think about re-entering. There is always a lot of volatility in IPOs as investors struggle to determine their value, but it looks like they are both starting to settle down a little after their meteoric rises. Feels good to have survived another day.Comment
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Hi Louetta,
I saw your original post, and I’ll try and answer your question about why I think we might be in for a deeper correction. I have enclosed the chart on a monthly scale for the Dow to illustrate what I’m talking about. If you look at the chart, you can see that we’ve been in a bull market since early 2009. In fact, it’s been an unusually strong bull market, with just two bullish 38% retraces. Since the last leg up, however, the deepest retrace is the current one at about 23%. That’s too shallow for a significant retrace, IMHO. I think we’re due for deeper retrace. If you really want to get scary, and you believe in Elliot waves, we could be in the fifth segment of a bullish pattern and the next major change would therefore be into a bear market. Does that mean I think we’re headed into a bear market right now? No, not at all. It’s possible this 23% retrace will hold and the market will just head back up on it’s merry little way, putting off the real trouble for another day. In fact, the economy seems too strong to justify a bear market in the near future. As long as the market stays at a 38% retrace or smaller, we could remain bullish for quite some time. The problem is, we haven’t had a retrace greater than 38% since 2008, but we had two 62% or greater retraces in the five years before that. Granted these events were driven by news, but a 9 year run without a single retrace greater than 38%, which is a significant Fibonacci level, seems a little too good to be true. Of course, past behavior is no guarantee of future behavior, but sometimes it pays to be a little cautious.
Last edited by BlueWolf; 07-12-2018, 11:33 AM.Comment
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Thanks for your response, BlueWolf. I fear I cannot add much. I do believe that as long as earnings continue strong we are safe from anything major happening to the overall markets. There will be plenty of worries like tariffs, the yield curve, inflation ... that will spook the markets as we have recently seen and make technical trading tough.
Some folks I talk to speak of rotating corrections, e.g. the significant deterioration this year in XLF and XLI while SPY and QQQ hang in or go up. They figure this sort of thing will allow things to correct when needed without croaking us.
I always enjoy telling people I first became interested in the markets when I entered high school. The NASDAQ was at 5000. By the time I graduated it was at 1600. I turned 30 before it got back to 5000. So yes, retracements are out there.Comment
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If we get another 12 year retracement, a lot of us seniors may run out of $$ before we check out.
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This time methinks the 5000 (or 7000) is based on something.Originally posted by billyjoe View PostComment
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Another incredibly bullish day that actually negated everything that happened yesterday. The market wants to be bullish, but it spooks easily, so if you want to buy and hold you probably need to be prepared for at least a little whiplash. In any event, it’s a good day trading environment, although trading these gaps at the open can be difficult. Let’s see what tomorrow brings.Comment
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Good point, Louetta. I'm trying to be ready should there be a major correction. NASDAQ does seem to be on rather firm footing this time.Originally posted by Louetta View Post
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Market gapped down hard at the open today and then immediately started bouncing and stayed bullish for the rest of the day. I think the dissappointing Netflix earnings might have been the catalyst for the gap down, but even NFLX started to immediately rebound. In any event, it was another good day for day trading. Although playing a gap at the open is tricky, even waiting 15-30 minutes into the market today was still a great environment for trading bounce plays. Check out the attached 5 minute NASDAQ chart.
The overall daily trend for the Dow is still sideways, but the NASDAQ clearly resumed it’s bullish trend several days ago. The retrace on the monthly held at a very bullish 23%, and the retrace on the shorter time frame daily held at a middle of the road 50% for the uptrend started in early May. Even beat up stocks like SEDG and LRCX look like they’ve formed temporary bottoms. Where do we head from here? I honestly have no idea because we are in the midst of earnings season again. NFLX seemed to throw a scare into the market, and if a slew of major players have bad earnings, the water could get bloody. If, however, the majority of earnings are solid, I can’t see any reason why the market can’t have more upside to it. That big retrace is coming, but when is anybody’s guess. If it gives you buy-and-hold types any comfort, I did add one position to my long term account. I’m a little nervous about adding it at this point, but I like the product, year-over-year earnings growth has been spectacular, and it has a clear stop. On the minus side, it’s not a profitable company yet.
Good luck in your trading and, above all, be nimble.
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Well, the market continues it’s gyrations. Yesterday was a case in point. The market gapped up at the open and then faded for the rest of the day. I told you those gaps were hard to play, and yesterday I got killed. It happens. The thing is, earnings have been very good across the board, so the likelihood of continued upward movement seems high. Still, there is some kind of underlying skepticism that wants to suck the market back down, so I am continuing to be cautious, even though I did add two new positions to my long-term portfolio. I hope that wasn’t a mistake, but I don’t want to miss out on the market’s continued bullishness. I just think there are a lot of people out there that believe the market is overextended and are looking for a correction. I did some research, and I did find that in June there was a massive redemption in mutual funds, i.e. there has been a lot of money outflow from these funds. That’s usually a sign that fund managers are reducing risk. I have included a link to an article about this. I also included a NASDAQ chart to illustrate how much the volatility has increased this year, even though we remain in a strong up trend. Good luck to all in your trading.
Article on fund redemption:
NASDAQ daily chart:
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I still prefer technology. I think the growth will be, in general, in this sector and also not so cyclical like energy or unsure like financials. So all of my Portfolio is invested in technology stocks.Comment
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I like technology stocks too, wifwif, and, long term, there’s no question that is where a lot of growth will be. Just a a couple words of caution, though. You have to pick the right technology stocks, and that can be difficult given how quickly technology changes and how easily it is for upstarts to disrupt and take over a market. Consider diversifying a little. Right now the world economy is humming (especially in Asia) and we are at full employment in the US, so, barring a major event, I don’t foresee a bear market any time soon. Technology stocks will not be immune, however, to a major correction or reversal when (not if) it occurs. On a lighter note, somebody once told me that the three most recession proof stocks are fast food, alcohol, and fashion. I always took this to mean that anybody can get through a recession if they’re fat, drunk, and trendyOriginally posted by wifwif View Post
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Hello BlueWolf,
you are right. The Overall trend for Technology might Change, but within this Environment I think currently sustainable growth should be in Technology, especially cloud (and I hope also Network security, perhaps also semiconductors).
At the beginning of the year I also had 1 Position in Restaurants (MCD) and 1 in tobacco (BTI). But with the Environment of rising yields I suffered Price decreases in those stocks and sold them. So currently I am totally in technolgoy in this principal growth Environment, but as I also have only few positions, this might Change quickly.
In a recession I also think that stocks like Food, beverage, alcohol and tobacco are favored, Fashion I can't bevlieve because People should have not so much Money to spend it on Fashion/trendy clothes and things. If People have no Money, they are still in Need to eat, drink - and when they are addicted, smoke
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