Thursday, September 23, 2010

The easy money is gone

Yes dear readers, the easy money in this rally is gone. Why do I say that? Have a look for yourself. Below is the hourly chart of S&P.

As you can see, this is the first serious pullback the market has seen since this rally started around the 1140 level. The S&P gave up the important 1130 level today and the next support is 1116 - the MA(200). And it will come as no surprise to those of you who are regular readers of this blog, that the rally stalled due to the financials. Here is a chart of the financials ETF.

Both the MA(50) and MA(200) were lost today and the next support is at 13.80. 

Nasdaq looks a little better compared to S&P as it managed to hold on to the 2325 support. Russel 2000 though is another story, as it has unlike the overall markets, it was not able to break out of its trading range during the current rally. It stopped right at the MA(200) today.

Personally speaking, I got stopped out of LVS at 32.90 for little over half a percent gain. For most of the trading session, it seemed like I had a winner here but then it fell down with heavy volume. I day traded JASO from 8.60 to 8.85 for around 3% gains. My biggest position right now is cash.

So, where do we head from here? Like I said earlier, this is the first serious pullback we have had in this rally and I believe the easy money in this rally is gone, at least for now. Sure we can continue to go up from here, but after the action today, it will take a few days for the charts to "correct" themselves. I am willing to wait for the markets to resolve themselves in either directions and decide where it wants to go. So, my strategy here is to look for day trades or take smaller positions. I am pretty pleased with how I have traded this rally so far and its time to switch to defense now.

I leave you readers with 30 minute chart of LVS. It's a good example of how stocks usually take stairs on the way up and escalators on the way down! 

Take care and good luck!

P.S. Chart of the Day


Goldie said...

There is only easy money in hindsight..

positiontrader said...

Well, what I mean by that is that its been a relatively easy market to trade so far but that's going to change now in my opinion.

ppmoore said...

Well said MT.
Succintly summarised where we are now

positiontrader said...

Thanks! Glad you liked it.