Swing High

The markets showed strength this morning, but pulled back nicely from the early highs of the session. The Russells (IWM) and Nasdaq (QQQQ) showed relative weakness today. The VIX behaved as expected and finished with a slight pull back. The TICK and the TRIN were neutral/mixed today. All things considered, today’s action was unconvincing and supportive of the bear case. It is very tough to gauge where the market wants to go from here. I would like to see a consolidation here or at least a better pattern set up before I take any major positions.

Looks like we will just have to wait and see, but the markets still look like they want to go lower from here. Thanks for being a part of Swing-High.com! Always trade with a stop loss and manage your risk appropriately. Capital preservation comes before profits.

Happy Trading,

Jason

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Hello Traders,

The markets are higher today on news reports. CIT Group (CIT)  filed for bankruptcy over the weekend, which had the potential to act as a Lehman Brothers type catalyst leading to a “Black Monday”-type drop in the markets. However, Ford (F) beat earnings expectations by posting a $1 billion profit and providing positive guidance. Keep in mind, much of Ford’s earnings can be attributed to Cash for Clunkers, so weigh that with a grain of salt. ISM Manufacturing Index data came out better than expected this morning as well. Pending Home Sales also beat expectations. That makes it three to one for news supporting the bull side today.

The VIX has a healthy pullback in the making today at about -7%. The VIX is finding support at the 50% Fibonacci Retracement Line. The TICK is surprisingly neutral and the TRIN is reading slightly bearish. With the divergent action in the market internals, this pop today looks like a sympathy bounce.

The SPY is finding resistance at the 50% Fib line of a recent sell off which also happens to be the round number of 105 and the bottom of Thursday’s candle. The Russells (IWM) are still in a confirmed double top. The Financials (XLF) are relatively strong today, which might be attributed to CIT Group’s (CIT) bankruptcy. The Nasdaq (QQQQ) and Russells (IWM) are showing relative weakness intraday.

In general, I am picking up short positions and will continue to do so if the markets stay bullish. Today’s action is looking a lot like a sympathy bounce (much like last Thursday). I plan to play the downside with a basket of inverse ETFs (most likely: TZA, SPXU, FAZ, EDZ).

Thanks for being a part of Swing-High.com! Always trade with a stop loss and manage your risk appropriately. Check back this evening for your Post Market Analysis.

Happy Trading,

Jason

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We saw some serious deterioration in the markets this week. All of this action culminated in Friday’s incredibly bearish activity, with the TRIN and VIX giving highly bearish sentiment reads. The TRIN was well above 2 for most of Friday’s session. The VIX popped 24% on Friday putting it above 30 and causing it to close above its upper bollinger band.The volume is picking up on the down moves. Market Breadth reached extremely bearish levels on Wednesday and Friday. (Side note: if you do not understand something I just wrote, please let me know so I can explain it thoroughly).

The SPY monthly chart closed below my thick red trend line. SPY also broke down out of its rising wedge on the daily chart. IWM has a confirmed double top formation on the daily chart. The Nasdaq (QQQQ), Russells (RUT), and Financials (XLF) have shown significant relative weakness lately which is important because they are often considered leading indexes.

I made a couple of day trades this week. I had a 5% gain with SPXU on Wednesday. Played TNA for a healthy profit on Thursday. Much to my regret I sat out Friday. However, I am mostly in cash, so I am content with my neutral position (especially because I am not net long). I do plan to start picking up short positions on Monday morning and throughout next week.

The markets are looking very bearish. Please do not read this the wrong way. I am not excited because stocks are declining and wealth is being destroyed. I am excited because stocks are moving quickly and in an increasingly decisive manner. I like to couple fundamental analysis with technical analysis, and the fundamentals have been screaming at me for over a year that stocks should go down. Now, finally, after more than six months in a “bull market” or “bear market rally,” the technicals are joining in on the bearish chant.

Do not let this scare you if you are a new trader. There are many ways to play stocks to the downside. The most simple play in a bear market is to move into cash. If you do not own stocks, you cannot lose money as prices decline. In fact, your broker most likely pays you a tiny amount of interest on your cash; you could also buy short term bonds. Many traders will short stocks in a bear market (sell high, buy low). If shorting is not part of the trader’s strategy, buying inverse ETFs is a valid play to benefit from downward moves in select groups of stocks or indexes. Options traders buy puts in bear markets to make money on the downside.

As you can see, there are plenty of ways to profit in a bear market. If you want me to explain a strategy in greater depth let me know. Otherwise, I will explain strategies at my discretion.

Thanks for being a part of Swing-High.com! Always trade with a stop loss and manage your risk appropriately. Capital preservation comes before profits.

Happy Trading,
Jason

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The major indexes are down hard today. The VIX, TICK, and TRIN are confirming the move lower. The SPY is forming a low base on the daily chart and the IWM is once again in a confirmed double top formation.

No trades for me today as there is too much uncertainty at this point. If SPY breaks down out of its high base I will start picking up short positions (most likely FAZ, TZA, and/or SPXU).

Thanks for being a part of Swing-High.com. Always trade with a stop loss and manage your risk appropriately. Check back later today or tomorrow for your Post Market Analysis and/or Weekend Review.

Happy Trading,
Jason

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Strong up move in the broader markets today. Most indexes finished up over 2%. The VIX dropped well over 11% today and the TICK and TRIN corroborated bullish movement all day. With this up move (higher high and higher low on the daily chart of SPY) I will mark a swing low here. From here we should see a small up leg. However, we now have a lot of overhead resistance to fight through. Expect major resistance on SPY at the $107.30 area. I will not trade heavily in either direction and whatever trades I do make will be day trades until we can get a more definitive trend.

This morning, a couple major economic reports (GDP and Jobless Claims) beat estimates. Keep in mind that much of the GDP increase can be attributed to government involvement and that detracts from the significance of that GDP number. Keep an eye on the economic reports due tomorrow morning. The big ones are Consumer Sentiment and Personal Income and Outlays. Also due tomorrow morning are the Employee Cost Index and the Chicago PMI.

Thanks for being a part of Swing-High.com! Always trade with a stop loss and manage risk appropriately. Trade carefully over the next few days. There is a plethora of uncertainty in the markets right now, in either direction.

Happy Trading,
Jason

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