As you know, Tape Talk is cut and published Tuesday, Thursday and Sunday’s. I’ve been doing this for the better part of the last 3 years and have only missed a few. Occasionally however there are market moves that need to be addressed outside the confines of these time slots and is one of the reasons I simplified this blog as I did. Tonight is one of those times.
First allow me to say that I haven’t a clue what Ben Bernanke said today, nor do I care. The market has absolutely no new money coming in and hasn’t had for the last couple years so what it all boils down to is traders shooting at traders. Outside noise simply acts as the catalyst to move traders from one side to the other. As someone who was short on Tuesday, let me tell you it wasn’t fun. The move was relentless and I suspect it caught many off guard and leaning the wrong way. By the time it was over, towels were everywhere as bears threw up their hands and gave up. It was this short covering that gave way for the incredible burst up.
There was little new buying so when today’s drop began there very few shorts underneath to support the action by covering their profitable longs. The trap doors were open and down we went.
I have discussed ad nauseam that this current environment is NOT to be played on a swing basis. This market is either a day trading tape or a trend tape but nothing in between. This tape takes pleasure is chewing you up and spitting you out, which leaves you with one of two choices either shorten that leash to a stub, or lengthen it to a lasso.
Since I rarely day trade, I’ll leave the shorter term subject matter to my Tickerville moderators who continuously knock it out of the park with their day trading skills and rather focus on the longer term by once again pointing to ‘ole blue. OK so on my charts its red, but go with me. It’s really very simple, as long as this market is trading below its 50 week moving average we must lean short. Now that does not mean the market won’t try and rip your head off in the mean time, but what it does mean is that it is technically unhealthy and prone to significant slides as we saw today. Shorting is perfectly acceptable however you MUST lengthen your leash on your stop, thus reducing your position size to keep your risk in line. You cannot, I repeat, CANNOT simply set a stop over some ‘day high’ or common pivot that every trader and their brother is watching. Traditional TA is NOT working nor will it probably ever work again. You must think outside the box, even if this simply means lengthening your leash to do so.
Yesterday many daily charts were shaping up, yet weeklies took center stage. The bigger picture is ugly and down. You can play it with a long leash or you can sit on the sidelines. Anything it between is a recipe for disaster.
I continue to favor the EUO, DZZ and am short EWW and XRT.
Good night
~ Q
