Friday, November 7, 2008

10.07.08 - Bad News in an Oversold Market

After being so oversold after the 10% two-day rout, the market is getting a bid in price with a slightly positive, albeit wavering cumulative tick line and a strong, but flattening AD line. Hard to read the tea leaves in the context of the horrible economic news and obvious continued liquidation. It's probably more along the lines of personal cognitive dissonance though, as the outlook feels so risky even as the market catches its slight bid.

Sometimes I think I'd be better off not knowing the news (beyond being aware news "events" are pending in the most general sense). I know many traders swear off CNBC for one. As Brian Shannon pounds home daily at Alpha Trends, "Only price pays!" Traders definitely can't afford to get married to an opinion or blindly follow a model in this fast-break market. Cut back your size if you are uncertain, keep trading what you see, and watch that support line above.


o VIX & More - A bull case observation.
o Traderfeed - Win by learning to lose.
o Quant. Edges - A two day edge?
o Emini Addict - Trading plan example.

10:25AM PST: We are at the apex of a narrowing wedge, be prepared for a break out. Signals are still mixed vis-a-vis direction. But that could be resolved soon.

10:45AM PST: Back to range bound. Pivot/VWAP at SPY $92.10 is holding so far.

11:40AM PST: Did I ever mention I hate narrow ranges. Upside breakout.

11:55AM PST: Obama speaks but says nothing here except to confirm social welfare... even a couple concrete points would have been helpful. Too much build up for a nothing event featuring a confused dialog. Alternatively he could have merely presented the process he is using to build a cracker-jack economic team, and referenced generally the many terrific ideas they have, which he looks forward to announcing and implementing "very soon."

12:10PM PST: Supportive volume spike. I agree with Cashin, this should have been scheduled for after the market close. OK, enough politics for the day. We need to break that VWAP again or risk a sell into the close. We are just at it right now, it's a risk point.

CLOSE: Confirmed the supportive volume spike, and away we went. Be sure to check out the Weekly Rewind before Monday, and enjoy your weekend.

Never Investment Advice

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