Very Confusing Market...
This has to be the most confusing market environment ever! What is even more surprising is S&P proclaiming that we may already be at the end of the sub prime crisis. The market action is also starting to get very volatile. Earlier in the day, the DJIA was down over 200 points. Now it is getting very close to penetrating positive territory. I don't know whether to commit more funds to the long side or the short. My instinct is telling me to just sit on the sidelines and see what happens. For now, I am not adding more to any of my positions and I am not making any new trades. I'll work with what I have for now until the future trend becomes more clear.
posted by Nick M. @ 1:16 PM
13 Comments:
Gold over a thousand dollars an ounce! Crazy. I can't say the end, but I think the craziness indicates an approach of the darkest hour. A hedge fund flopped today; that will spread some more panic; let a few others go belly up... Cash posisions are good posisions ;)
My average-joe buddy came in yesterday complaning about his IRA and wanting out. That's a good sign too ;)
Wait until the major papers jump onboard and I'd say we've seen the worst of it...
Is it wrong to be excited? ;)
-Chad.
Chad,
I can understand why your excited but until I see at least of handful of strong stocks setting up to breakout, I will hold off my excitement. Studying some of the past charts of the DJIA, NASDAQ, and the S&P, I have seen this type of movment before. In fact, I wouldn't be surprised to see the indices rally even past their 50 day MA before the next batch of institutional selling hits the market. Basically, I don't think the worst is yet over. With so many already becoming bullish again, how can it? The worst will be over when everyone is scared to buy a single share of a stock. I know it sounds like a bleak scenario, but that is exactly what happend in 2002-2003. Things were so bad by then that everyone wanted to short and everyone was afraid to buy...right at the bottom of that downtrend. Right now, there are too many optimists. Also, I seriously doubt that this small correction is all that the markets needed in order to digest 5-6 years of straight gains. I could be wrong, but then again, how long will the market go up? If history proves correct, not much longer.
I fully agree about being in cash right now. If I didn't have to do this for a living, I'd be in 100% cash right now. Unfortunatly, until I choose another occupation, this is my job, and I have to trade in order to put some bread on the table. If you don't depend on the markets for a living, I suggest you take a breather from it and enjoy life. Being a full time trader is stressful enough and I tell all my friends and family to spare themselves of the stress and invest when the time is right. That way they can avoid the rough patches (such as these) and be successful in their investing.
As far as gold heading higher, let it head higher. Let the dollar fall to new lows. One day Gold will top ( and be a good commodity future to short) and the dollar will bottom. Life and the economy will go on.
I think gold has long way to go.. atleast cpl years.. Nick any gold juniors on fire and on your radar ?
vgz may finally find its mojo.. I am in quite a bit into this thing since mid-4s..
CMO n MFY are good finds..
Nick,
Thanks for your honesty about this goofy market. I sometimes feel like the only one who can't figure it out. So many people are calling bottoms or saying we're going to 9,000 on the DOW, or saying time to buy--blah, blah, blah.
I moved to 75% cash yesterday and was feeling pretty good watching the market tumble and then it comes back and I realize all the money I COULD have made today. It doesn't make much sense and trying to figure it out just makes me unhappy.
Scott at stockpunk.
Yre,
There are tons of small gold stocks out there. Some that I like include: MGH, PMU, KGN, GBN...there are others but these are my fav right now.
Scott,
I agree 100% with you. This market is stressful for all of us. Sitting in cash is the best option right now as the trading situation is very difficult. It is hard to commit to either the long or short side since the market seems to see-saw in both directions every other day. The only thing that one can do is, either sit and wait it out (there will be better times to invest and trade) or try to place a few strategic trades on the long/short side. Moving to cash was a good idea. I know it sucks to see the market sometimes move without you but trust me, just by sitting in cash, you will probably end up outperforming most traders out there. I'm being serious. If my current open trades fail on me, I will also join you in 100% cash until this nonsense in the market clears. Anyway, best of luck to you and keep up the great work on your blog.
-
Nick
I tell you, I certainly can't think it's anywhere near close to over. But every day that I hear more "normal" people "interested" in it is encouraging.
In the mean time, though, I like to check StockCharts.com's "market carpets." Look for the green patches and it will show you where everyone is flooding there money during the whip-saws of late.
I've noticed Sara Lee, Hershey Foods, Tyson, and some other wouldn't-have-guessed-it tech stocks lighting up lately as people search for "safe" deposits.
Anyway, as cheesey as it sounds, it's still economic history that you're live action in, that will go in the books not long from now.
-Chad.
That is an interesting concept/tool that they have over at StockCharts.com. It is basically showing that money managers are placing their funds in defensive stock sectors such as food products. This is a sign of bearishness for sure. Defensive sectors such as food, containers, etc., go up when the market is in a downtrend or reccession. Anyways, I'm starting to become more interested in some of the indicators and tools over at StockCharts.com.
Yre,
How did you like MGH? MGH did quite well today.
Nopes... I am not sure when I will learn a thing in the market...
I got in .70 at one point could stay long.. still not sure why..?kicking myself..
kbx also lookin good.
never get out early in junior gold stocks.. lesson learnt wit MGH.
Yre,
I like KBX as well. Im also sure that MGH will ultimatly head higher in the near term future, so its not too late to buy. I'm waiting for a nice dip to the 10/20 day MA. That should provide a good buy opp.
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