Yes, it is boring and really no fun. But it is what it is, and it serves a bigger picture purpose that in the short run feels bad psychologically. I understand and get that completely. It doesn’t change the fact that markets can and do need extended periods of boredom and mind games on traders to get it where it needs to go where things are safer to get involved. Sure, you can take chances here and get in more set-ups, and they can easily work, but by being more patient for a little bit here, things could set up beautifully.
Oscillators are unwinding, although not rapidly. That said, MACD’s have fallen closer to 0, but are not there yet. RSI’s are near 50, and that’s great. Stochastics are best as they’ve really unwound. All in all there’s not too much depreciation, while the unwinding process continues. We can do another 2-3%, and that would not be bearish. There’s always that short-term risk, but in the end, it’s nothing we can’t deal with if you’re more patient as I’ve said. It also means holding some exposure is fine because there’s also no guarantee we go down that far. The chances of pulling back further are real, but there’s no guarantee about anything to the down side in an overall bull market. I would like deeper unwinding, which would require at best some lateral movement, and at worse, another few percent lower. For now, we watch and learn. Looking for real bottoming sticks. A day at a time.
Politics are playing their role on the markets. As Romney has picked up speed so have certain areas of the stock market, especially coal. Some commodity areas are looking better, but the problem is it’s hard to know from day to day as everything hinges on the loved candidate of the moment. If Romney is favorable, we have some areas moving higher, but if Obama picks back up momentum, we lose those gains rapidly. When politics are ruling the roost, it’s best to stay clear of those types of stocks. So be very careful in the commodity genre. Stay with the known stocks that seem to do well, or poorly, based purely on the technicals they’re dealing with in the moment, which is the majority of the market. Again, commodity stocks, and also defense stocks, are the most prone to heavy swings for the time being.
In markets such as these, it’s very easy to make your worst trading mistakes as you find yourself really bored and anxious to trade. Any trade for the sake of trading just because it’s what you do with your days each and every day may not be to your benefit. Many of you trade for a living or trade quite a bit, even if you have other income. Don’t get sucked into the boredom of the market. Take walks. Do something to take you away from your computer screen if you feel overwhelming desires to play when you know you shouldn’t be. The risk reward is not great here from either perspective so adjust and don’t feel compelled to play just because you’re at the “office”. Markets such as the one we’re dealing with now often causes profits one made over many months to be lost in a very short period of time. Don’t be that trader. Recognize the environment we’re in and you’ll be fine.
Longer-term, S&P 500 1423 is the 50-day exponential moving average. That level may yet be tested and possibly breached to the down side. It’s not the end of the world if that does indeed take place. It doesn’t have to go down that far, but the oscillators are such that we have the room technically to go there. It would cause more pessimism and far deeper unwinding, and I, for one, would welcome those events. Nice and easy here as we watch and learn the market’s intentions for the short-term.
Peace,
Jack
