A long, slow day where the markets finally ended pretty much right where we started. In spite of S&P closing in the red today, I think today was bullish. I know what you are thinking dear readers - why? Read on....
Well, as I pointed out yesterday, the markets are in a heavily overbought state. There are two ways they can make their way from an overbought to a "neutral state": (a) sharp pullback (b) slowly churn and consolidate right here without giving too much of the gains away, and this is exactly what happened today. This doesn't make a very interesting market for the traders, a difficult one to trade actually, but is bullish nevertheless.
Looking at the S&P chart, I see a doji formed today, which implies indecisiveness between the bulls and the bears. Again, considering the run up we have had recently, the fact that the bears are finding it hard to cause a pullback is a bullish sign. That said, the markets are still way in overbought territory and I like the odds of a pullback here in the very near future. And I still think one should be careful holding overly aggressive long positions overnight. The fact that bears are finding it so hard to cause this pullback just means that any pullback should be taken as a buying opportunity. Makes sense? Basically, all I am saying here is be cautious with your long positions and a consolidation here or even a small pullback is actually a bullish sign.
NASDAQ managed to have an up day even today and got rejected at the 52 week highs. So, that's your immediate resistance right there and this is an important level to keep an eye on tomorrow.
Personally speaking, I am very pleased with the way I traded today.....I did not trade today :). Let me explain. We all know all our strengths and weaknesses as a trader. My biggest weakness, I think, is my impatience - both in taking positions and taking profits. I admit this impatience extends even to taking losses, so it actually balances things out quite nicely most of the while. But seeing the markets not doing much today and not seeing a clear edge either way, I decided to relax and not even look at the screen for most of the time. A younger me would have tried to scalp or make things happen but the definitely older, and perhaps wiser me :), didn't feel any need to trade. The market gives us numerous opportunities everyday, why not just wait for the "easy" ones?
Take care and good luck!