5/6/2011 1:04:57 PM
Here's a quick update on market action.
Wow... This market volatility is great. As discussed this morning, we've been keeping an eye on bonds and the dollar. Initially, the markets rallied. Now there's a lot for the markets to digest, as they've pulled back some of this morning's gains.
Now I'm not a big news guy, but on the 1 year anniversary of the flash crash, the markets haven't disappointed. I was at a meeting in Boston on that day. In the lobby, they had CNBC playing (I love those types of offices). I wish I was in front of a screen. However, I'm not sure what I would have done, as emotion can easily overcome good trading skills. I still think there'll be a flash up move at some point, as most are expecting a flash crash.
Second, Oil, which put in a huge hammer overnight. Basically in 4 sessions, oil wiped out 10 weeks of gains. Now normally, a move like this in oil is followed by further weakness for another week or two. However, these are not normal markets. And the news out of the Euro region is causing volatility. Remember, in oil (unlike Gold) volatility means something and is interpreted like stocks.
Regardless, talk of Greece leaving the euro zone, so they can print money and inflate their way out of their crisis, is causing the dollar to start rallying as well as bonds. So the thought is that this would be good for the Euro.
So ultimately, this could be a great buy point for oil, if the dollar reverses and bonds reverse. Something to consider. I'm playing it, but I tend to get in and out of positions very rapidly. When you trade for a living, you equate profit to weeks income. This move has the potential to make several weeks pay. So it's worth sitting in front of a screen as the sun shines outside... And when I take profits, I always pay myself first. You need to create that reward as I believe people's actions are motivated by two things. The desire for pleasure, and the need to avoid pain. Any time you can reward yourself, do it.
Back on the market, the action has me cautious. The rally in bonds has created huge potential liquidity for stocks to rally. And that would flow back into commodities. Being a Friday, I'm not sure too many people will take a big bet ahead of the weekend. I wish I had an answer for you, but sometimes these markets are very difficult to read on an intra day basis.
Point is, we remain in Sell Mode, we were looking for a potential bottom in one to 3 weeks when we issued our sell signal. We're at the one week point. The NYSE Side is more bearish than the Nasdaq (which isn't great for us). But the market is also oversold. As I always say, the key is how the markets close and where sentiment is.
We'll report on that this Monday. Have a great weekend.