Today is Friday, October 1st, 2010 and the markets did a great job in holding up as a lot of bears may be getting a bit nervous holding their shorts over the weekend.
Let me start out right now, I do not know which way this market is going to go with its next move. Many times the stock market has already tipped its hand and reading the move is really very easy.
It would appear that a break is in order, given the large run up and basing we have seen over the last two weeks or so. That has been the markets M.O. of the past and it is certainly possible again here this time around, but let me give you just a moment of pause.
Reading the market many times can not be done until something has happened. At this point nothing has happened that would say the market is going to drop. So the logical conclusion is wait until something has shown which way the future direction will take us over the next few weeks. It is very possible to do this and I have done it in all the major turns of the market of recent memory. Its not that I am so good at reading the market, anyone can do it; you just have to know the language.
If you go to a foreign country, would you expect to be able to speak and read the language as you get off the plane. How about after a few weeks or even months? I don’t think that is realistically possible. The same is true when traders try and read the markets. It takes time. When you see and analyze price patterns again and again, you will see that certain characteristics are present in all of them. Since the stock market is factual in nature, meaning it mirrors the same type of price patterns or behavior across all time frames, you can learn the language that will bring you home, “trading for a living”. A fractal Stock Market gives opportunities to all participants no mater what their style. The point here is, reading the market will open doors and give you the ability to write your own ticket.
So, back to the point. The market is sitting on cliff. That cliff will either be a stepping stone to yet a higher mountain, or it will be the catalyst for the tipping point over the edge it now sits on.
A couple of days ago, I wrote about the stock market having an inside day and that the volatility coming out of that inside trading day was going to produce big price movement. I did mention that we could possibly see two inside days together and that would create even more power and pressure once things got going. We have just seen two inside days but they are staggered. We came out of the first one violently, first to the upside and then quickly to the downside, + 100 points on the Dow and then down -200 points in a matter of a couple of hours. Today we saw the second inside day and yet again creating pressure for the next move.
A break of today’s lows at 1134.50 first and then on too yesterdays lows just after that of 1131.25 will produce a multi hundred point loss in the Dow and dozens of S&P points in just the first few days of breaking those levels. (my opinion only) (this is not investment advise)
If you know what is their, you would understand. What is their is, sell orders. They are parked there like automobiles in parking lot, just sitting there, waiting. If you get a few whales to push it over the edge they are all going to go off and it will induce mass selling.
On the other hand, everyone is looking for this market to roll over after putting in a reversal day yesterday, they are just waiting like it is a for gone conclusion. It very well may be that it will crack and I said I did and do not currently have a strong opinion one way or another right now at this time, but I believe we need confirmation to get this one right for sure, is all I am saying.
Their is a chance we can still rally from here. It sure would catch everyone by surprise. The sentiment numbers still have bullish tones to it at only 43% bullish right now. Also given the fact that the first 4 trading days of the month are traditionally very strong. You can go back to 1930 and see a very consistent pattern of this being true. Call it human nature, but it is a fact that a lot of buying comes in at the first few trading days of the month. So, lets just see what the market is telling us on Monday first before we take the ride down. Once we see it, we will then know what the trading bias will be, in the days and even weeks to come.
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In today’s trading I had a nice easy day picking up a some nice trades. A few small scalp trades and one nice trend trade for 4 + points but only small size. It all adds up and made for a nice finish to a good week. I had good gains all week except one day of flat returns. I have been trying to change up the screen shots I post and am not sure what I will be showing in the weeks to come, but I don’t always want to show the same thing. In the mean time I was just showing my equity chart and not my trades. I am still thinking about how I will post future progress, but today I will show just a clean chart, no indicators in a different size tick chart. I will come up with something new, but don’t know what yet. today’s trades below.
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