This is a short post from Fridays session, February 19th

Well, Fridays session had a little twist to it, in that the Fed had decided to raise interest rates. A good and bad sign. The good sign is in that they would have not done that if the economy was not growing. The bad sign is, that it could signify the start of a trend of increased rates, which could increase into additional borrowing costs for corporations and eventually could pose some interest rate competition to the stock market. Since rates are so low, it is currently not likely that investors are going pile into CD’s or Money Funds. There is not a return there at all, especially when you factor in inflation, you are looking at a negative rate of return. So again, not a huge risk at this point. The market liked it, in that it stopped a slide that had started in the night trading and could have turned into a route.

These are the unseen changes that can come up at any time. That is the reason, you have to be able to read the market and not be stubborn with your assessment of things, trying to force your will on the market, not usually a good idea.

By reading the current price action, you could have seen the small ralleys as they happened one after another. You may have played a short just before 7 am, but looking at the action around 7:20 a.m. West Coast, you would or should have seen that the pressure was on the buy side. At that point, you either wait for a clearer signal, or you go long.  Everything on my charts said buy, all across the board. If you are looking for a short, that was not the place. You could have been tempted at 8:50 am to go short, but you were too early. The topping process as it was finishing up at around 10:20 was a much better area to attempt it for any movement of size. Again, the market said at that time in point that it was getting tired and in need of a rest. It was over-run by the bears, but only temporarily. The S&P index did manage to recover from the pre-market selloff and added a little to its previous gains.

The market sentiment as measured by Investors Intelligence newsletter writers was again suggesting a market rally of some significance could take place. The bearish sentiment rose a little and the bullish sentiment also moved up a touch. It is still sitting around 35 % a very low number, suggesting as mentioned already a rally could come in here. I did comment on that last week, but thought we could get some sort of move back down for a spell. It still may come, but the current momentum is now up in the daily and the shorter term 120 minute charts. Will it continue, it’s currently hard to say, but given the sentiment numbers and that the momentum is up, it may be presumptuous of us to have any degree of certainty that the market is ready for a significant pull back. I don’t currently have any strong feeling one way or another for tomorrow, but would have to side with the current momentum. That would have been a smarter play for Fridays session, than trying to out guess the top the move back up. Either way, try to read the market and listen to what it is saying at the time you are trying to trade it.

Friday, I did not really have enough time to trade and thought I could slip it in. I was only trading small, but I did not like the very slow action waiting for the market to move, was killing me. I was trying to force something to happen. I did not want to wait. The price action from 10:30 to 12:00 on Friday was so slow, it looked like it was never going to move. I took a few trades, but just could not take it. I did see lower prices, but second guessed myself, because of the slow action. I stopped trading at around flat and decided to wait until next week. The conditions for me, were just not right and I could feel it. That is the best thing any trader can do. If things don’t seem or feel right, don’t trade.

Well, that is it for now. More good stuff coming this week to talk about, so until then. The few trades I took below.

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Tags: reading the market