Tuesday, March 4, 2008

03.04.08 - Cascade of Gaps Down


As a swing trader, I absolutely hate cascading series of gaps down when I am making a counter-trend play... I openly admit to feeling psychologically trapped in them. Anyway, we follow the model -- it's far more reliable than my personal state of mind. That said, use close stops if you are making discretionary buys unless you are a true long-term investor here!

So far today, the S&P500 has held at R2 (about SPY $131.45), but is now being "snagged" by the declining VWAP. While the leaders have been hit hard today, as of the time of this post they are showing relative strength vis-a-vis a recovery attempt relative to the broader market.

I noticed at the open that one of the long signals mentioned in yesterday's PM update became unstable and actually went back to cash on the official close. Welcome to the occasionally wily world of quantitative trading... Meanwhile, the market really needs to find its footing here, as it otherwise increasingly looks like we are setting up for a retest of the intraday January lows.

UPDATE: Excellent post by Dr. Brett related to my psychology note above!

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