Tuesday, September 20, 2011

trendless / range bound ...

today was a bit frustrating, we saw a nice upside in the morning, followed by the afternoon giving it all back and then some.  The QQQ's (the leading index during the past month) literally touched the upper channel that it was been in since the market bottom in August and then reversed.

so, although it was great that it touched the upper channel, it is a bummer that it didnt have the strength to break it.  With that said, it is nice to see the market is obeying basic technical analysis rules and seems to be staying within the channels.

the other indexes are still underperforming and IWM is really looking pretty abysmal.

It is clear that neither bulls or bears have much conviction right now and every time we get close to the outer edges of the channel, one of the two groups gets just enough energy up to bring the index back into the middle of the index.

Today, one of my most reliable proprietary indicators flashed a big bearish signal which I am sad to say hasn't happened since the market top on June 30th.  This indicator usually shows market tops both intermediate term and short term.  The indicator can take days to play out and sometimes (rarely) gets mooted by strength.  It is a two part indicator, where the first signals an impending change (happened today) and the second indicates when to exit (this hasnt occured yet).  This signal is so reliable that I am now going to stop any long purchases until we break the upper channel.  With that said, before the signal fired this afternoon, I went pretty aggessively long today and am holding those positions overnight (rather uncomfortably).   As with all trades, proper risk management will keep the losses (if applicable) to a minimum in the over all scheme, so for now I stick to the trading plan and wait for more indication as to which way the market will go.

I am also still short an equal amount, since those stops have not been triggered as well.  These trades had gone against me over the past 5-7 days, but since the upside momentum has not been overly strong, I have not been stopped out as of yet.  As I mentioned about a week ago, I think you can play both sides of this market, until a true longer term trend emerges and my positioning on both sides of the market is a testament to that.

It is a frustrating market, but there is still money to be made, you just have to adjust your timeline a bit since reversals occur much more frequently than in a trending market.  As I've stated before, longer term players are better off sitting this one out until a definitive direction is declared.

Until tomorrow ...

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