More bad economic news on Friday, including a multi-year high in the unemployment rate, which spiked to 6.1%, put pressure on the market Friday morning, and it looked like more selling was in store. But the market put in an afternoon reversal, and the major indexes closed near their highs of the day.
On Friday, the S&P 500 put in what resembles a bottoming tail. Perhaps we could see some continuation early this week. However, the long-term trend is looking bearish right now.
This summer has been a difficult one for buying breakouts. Unless you take profits at 1% or 2% or fading the breakout, profits have been hard to come by. Thomas Bulkowsi, who literally wrote the book on chart patterns, talks about this in a recent blog post. He offers this bit of advice:
Chart Patterns only Work in Trends
If price is in a trading range, meaning that it is bouncing up and down but not really moving anywhere, then a chart pattern could signal the start of a new trend. However, the breakout may be fake and price returns to moving sideways.
In these turbulent markets, I see lots of chart patterns with breakouts showing price rising but not enough to justify raising a stop to break even. My trading is suffering right along yours. I take loss after loss but know that if I don’t play the market, a trend will start and I will miss it. I do not know what the solution is to this problem. If I could tell when a market was trending, I would be retired. OK, so I did retire at 36, but you know what I mean. I want all of my picks to work. I want every chart pattern breakout to lead to a long up trend. - Thomas Bulkowski
So if you’re struggling in this market, you are not alone. August was a difficult one for me, and September hasn’t provided many opportunities yet. Until it does, I don’t plan to force trades, and may have some days like I had last week where I don’t post any charts for the next trading day.
I am mostly in cash right now, with a small position in SDS. I only have one chart for tomorrow, but for a day trade and with a trigger on heavy volume.
Good luck and good trading!
The market plunged today on heavy volume, as all the major indexes closed down around –3%. A huge decline that never let up. Traders were concerned about bad economic news concerning the state of the economy. Not all news was bad though,. WalMart reported better than expected earning. But in a Bear market, good news is often interpreted as bad. Traders saw this as a sign that the economy is turning sour, as consumers are looking for bargains on essential items.
The S&P 500, which I like to use as a market proxy, plunged through a trendline and through the 50-Day SMA today. It did find some support, but there are signs pointing lower.
On the 08/14/08 report, I posted a weekly chart of the S&P 500, and pointed out that it is approaching the 200-Day SMA, and to watch for some resistance here, as it did when it hit the 50-Day SMA in May. Although the weekly chart did not touch the 200-Day SMA, it did find resistance in this area and has reversed since then.
No trades for tomorrow. Waiting for a playable bounce next week, and hopefully the next rally will have some leaders this time.
Good luck and good trading!
The market chopped around today, but managed to find some support later in the day due to the finical sector catching a bid, and the major indexes closed basically flat. Oil and commodities got hammered again.
Although oil continued its incredible decline today, stocks are no loner reacting positively to this news. The market is now looking at the reason why oil is declining, which is decreased demand due to slowing economic conditions throughout the world. This has caused a rush to the dollar, which is pushing oil lower, and so on. Just take a look at the incredible move in the dollar index.
I wasn’t watching any stocks today, and am glad I didn’t. due to the action late in the day today, as the market found some support, we should see higher prices soon. But there aren’t many charts to consider. I am still very cautious about trading this market, so am only looking for day trades on breakouts with heavy volume.
Good luck and good trading!
