It was another tug of war type of market day on Wednesday which saw the Dow endlessly struggle to keep from losing more ground. The financial news from today was mixed, and this contributed to the market appearing to have no idea what direction to take for the majority of the day. Market and YM volume was slow at times, erratic at others and this caused the point moves on the YM chart to be very questionable throughout the day. As has been the case the past two trading weeks, the potential trade set ups seen on the YM chart today continued to be choppy.
There were many times today where a trade trigger was indicated but the actual entry spot quickly disappeared as a big point candle engulfed the safer buy area. This was then followed by a lull in the action where the point move would actually come to a complete stop or the volume would slow to where you had no idea what was going to take place next. The trend of the safer trades occurring during the first two hours was in effect again today, but even the majority of those set ups were ones that made me think twice about trading them. It's always easy to go back and look at the better point gaining trades at the end of the day and think about what could have been, but at the time those trades developed there was little indication that the point move would result in a decent gain.
I stuck to my game plan of trading cautious today and even though I missed a couple of decent winners I'm happy that I didn't get caught up in making the same mistakes I made yesterday. I could have easily made those same mistakes today but it was obvious after the first two hours of trading that the risk factor and odds of making a mistake were increasing so my decision to slow down was the correct one, at least for me. There's always another day and another opportunity to do better.
I mentioned earlier that news from today was mixed and here's a quick description of what the bigger headlines were. Oil prices slightly dropped, US factory orders gained a bit in July and the battered financial sector gained some ground on the day. Yet, the market struggled the entire session to keep from rolling over and playing dead. Joe Battipaglia, chief investment officer for Ryan Beck&Co was quoted as saying, "All of the market data the past two weeks has been very good," pointing to Wednesday's factory order data, falling oil prices and a recent revision upward of the second quarter GDP. He was then quoted as saying, "Despite all of that, you didn't get a commensurate market performance and that's troubling." In Deacon Mike's translation, Joe means that since the market didn't display a sustained upward move over the past few weeks and the volume levels in the market are low, be prepared for the markets to head lower.
Maybe the markets will tank and maybe they wont. I doubt anyone really knows what's going to happen tomorrow much less a month or so down the road. I do know that there's a lot more negative factors out there that can effect the market than there are positive ones. The drop in oil prices doesn't seem to have much of a positive effect on the markets right now and we still have pending hurricanes that could cause the price of oil to jump. We still have a bunch of geo political issues to deal with and the housing and financial sector problems are nowhere close to turning the corner. I tend to think that all of these overhanging issues are the reason traders are either being cautious or sitting on the sidelines. This results in seeing what we saw today, back and forth market action with little conviction or support for any type of trend that was created. I guess the lesson here is to be prepared no matter what the market does.
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