wow … another tough week for the market to say the least. The rally attempt off the lows failed on Thursday sending the market down to retest the lows today. My expectation is that we will get another bounce on Monday or Tuesday just because the market is so oversold, but longer term …
I’m getting very mixed signals with my analysis. In fact, thinks look pretty bearish. I found myself looking deeper at my analysis trying to find something bullish to jump on, it is never good when you have to dig hard to find something. In fact, one of the few items that I did find was that all of the indices ended the day with an inverted hammer. An inverted hammer is a candlestick pattern that looks like an upside down hammer. It shows that the day opened at the lows, went way up, then fell back down to close at the low again.
When an inverted hammer occurs at the bottom of a long decline, it is usually a very bullish indicator, in fact, it is called a “bullish reversal pattern” by most … showing that a reversal is the usual next step. Although it is important that the day after an inverted hammer we get ‘confirmation’ that it is indeed a bullish setup. So we need Monday to open higher and especially closes higher that the inverted hammer’s body, this shows that those who shorted today are losing money. The longer the market holds above the inverted hammer’s body, the more likely these shorts will cover, which could spark a short covering rally that could also lead to bottom pickers going long. So, with that said, I would be surprised if we don’t get a nice bounce as a result.
But … I kind of feel I am reaching here, since most other indicators look pretty bad. Especially if we look at the long term picture, things are pretty broken in the market. This doesn’t mean we have to go down more, but I really don’t think we will be jetting back up to where we were a month ago anytime soon unfortunately.
I strongly feel that a good trader needs to adapt to the current situation that is presented him or her. A trader’s technique will not always work in all market situations, and as a result, in order to consistently make money you must adapt.
In today’s market, the way to adapt is to either stay out of it, or move your sights to VERY short term. The market is just to uncertain right now to make any long term projections and the volatility that is taking place, makes the risk just too high.
3 days from now is just too hard to predict, heck even 3 hours from now, but 30 minutes from now … there is money to be made. I spent most of the week day trading fairly heavily, in and out of positions sometimes as quickly as 10 or 20 minutes, switching between long and short as the market signaled which way it wanted to go. Although fun, this type of trading is exhausting since you have to watch the tape very closely and move fast when a change is being signaled. Needless to say, I look forward to going back to longer term trading in the future, but in the mean time … I will live in the moment.
I can’t tell you at this point whether we are at the bottom or if we have further down to go. I think bottom picking is a futile effort that leads to money loss, and today is a clear example of that. Live to fight another day is the best mantra for the current situation.
Friday night … time for a well deserved drink and time away from all electronic screens for a day or two.
Have a great weekend and pray to the Market Gods that they help us next week.