Sometimes, small moves of the market tell big stories. Even though the market was down only fraction today, it speaks volumn about traders' confidence, or lack of it, toward the market. You can blame rising oil price, or try to explain it away as natural pullback after yesterday's huge move, but the fact that the traders are reluntant to hold the stock overnight simply indicates there is no convictions on buyers' side.
There are a lot of talks about the bottom of the market based on some contrarian's indicators like bull/bear ratio. It is said that there are more bears now, thus, it is time to buy. However, people fail to understand that, the bottom is a process not a singular event. It might be true that the 11600 will be the lowest point of the year for DJIA, but it also could be true that the market will hang around at this level for quite sometime. If you plan to hold your stock for six month or longer, than, these kind of indicators matter a lot, but if you a short term trader, this they are probably meaningless.
It is hard to say that we are out of woods now after yesterday's 400+ points move. As we pointed out before, the significance of that move was market is back above its support line. It is kind of confirmation of that support, nothing more. we may fail through it again if Bull does not follow through. To me, what is more significant today is that DJIA crossed over 12300 briefly and retreat, establish that as first line of defense that bull need to overcome.
On the economic front, we will have retail sale and export/import price tomorrow, we need some good news to keep the momentum, otherwise, yesterday's 200 Billion injection by FED will fade from the trader's memory like last year's movie.
I still think the best way to trade for the time being is to prepare both ways of your trade each day, and take profit as soon as you can. This volatility of the market is certainly a chanllenge, but in the meantime, it also offering a lot of opportunities.
take care
Conviction to the market, priceless..
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