If you've been trading the approximate 150 point range in the S&P 500, then you've done ok, but that trade is getting a little crowded.
$COMPQ
NASDAQ Composite Index
My compadre has summed this past week up well, which is great as I didn't really have much to say anyway. There's only so many ways one can say the market sucks.
If you're reading this blog then you already know that the selling over the past week has been relentless. Just this week the market indices lost 15% (NASDAQ) to 20% (NYSE) of their value.
Stock indices retreated from typical resistance at their 50 DMAs on lower volume in the first half of the week, only to bounce on Thursday and Friday. IBD calls a confirmed rally.
Last week I said we were still on hold and looking for our sentiment indicators, the VIX and Put/Call Ratio, to tell us that a bottom is likely in. These indicators hit those extreme levels we've been waiting for. The VIX spiked well above 30--peaking above 40 and surpassing spikes made earlier in the year.
Hello again, probably non-existent readers! So much has happened since I last bothered to put pen to paper (or fingers to keys, that is)--like socialism for instance.
Hello again folks. We know it's been pretty quiet at PBT lately. Perhaps PBT and I were too busy riding the rails to bother to peck out a post or two (or earning our paychecks...). Regardless, I hope you'll find something worth chewing on in this week's review.
If you were looking for a good entry for a new short position this past week, you missed the boat. Instead of a reflex bounce after last Friday's sell off (with the possible exception of the Dow), investors came back to the market on Monday ready to dump more shares. The selling pushed the indices even closer to their March lows. The NASDAQ Composite finally broke below its 50 day moving average (DMA), the last of our indices to do so, before popping back above it today.
I don't like to short sell individual stocks, but I do trade ETFs which short market indices. If the market is trending down, I look for opportunities to short the weaker index as it finds resistance at certain areas. At the end of January, I traded QID (shorting the NASDAQ) as the NASDAQ found resistance around 2400. At the time, the NASDAQ was underperforming the S&P 500.
Last week, if you took my previous weekly review to heart, you may have made a similar trade--say, buying DXD (shorting the Dow), and are sitting on a decent gain going into next week.
Two weeks ago, the four market indices we watch had broken above resistance at their 50 day moving averages and a key level of resistance. Two (the NASDAQ and NYSE Composites) had closed the week out just above resistance at their 200 day moving averages and the other two were poised to follow.
Since then, the market rally has broken down.
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