Today was a good day. Not because I made money, but because I was in the zone. I was able to ride a trend that I recognized developing for the past few days and the market actually followed through for once. It was a good day because trading wasn’t boring and there wasn’t the crazy intraday madness that’s plagued the market for what seems like forever. I even held positions over the weekend and I can’t remember when I last did that.
However at the end of the day I was literally spent. I didn’t even want to look at my computer screen after the close so I took my dog for a walk. I think I suffered from information overload today. I was invited, along with a few other twitter users, to spend the day at www.daytradeteam.com to check out their service. They have a chat room with a team of traders to help you spot opportunities, teach technical analysis, and more importantly, bounce ideas off of each other.Check it out if you’re looking for a service such as this because being a trader is lonely at time and it can be a good thing to be around other traders.
I had fun, but I’m slowly learning about myself that I’m not a daytrader. I’m just not set up that way and that’s not a bad thing. The way that my mind is structured it’s easier for me to be a position trader. I’m not cut out for the fast lane when it comes to trading. I like to ease in and out of trades in a calmer manner. I can’t process information that fast and trade effectively. I’d be all for a chat room with swing traders, but some days we wouldn’t be doing much as the trends are developing. Guess that’s what online pong is for.
I think it’s important to recognize what style of trading suits you the best and always trade from that point of view. Anyhow, between the chat, twitter, trading, and managing my current positions I was ready to get away from the screen for an hour or two.
Getting back to the chart below, I wanted to talk about what I was seeing that allowed me to be confident in my short positions that I held over from yesterday. I know this chart is hard to read because it’s so small, but it’s the best I can do for right now. It’s a simple 15 min chart of the Vix with a few moving averages and the DJIA is the gray chart behind the Vix.
Earlier in the week I was turning bullish as the Dow was forming a bottom and the Vix as on the wrong side of it’s moving average trio.I noted that a crossover (indicated by yellow circle) was about to occur and if that happened the Dow could pop. Well on Tuesday that crossover did occur and on the following day the markets did in fact have a big 200+ Fed induced rally. The dent in the armor of this rally was the Put/Call ratio being at extreme bullish levels which had me skeptical in any follow through.
When the markets were unable to build upon those gains it was pretty obvious where the markets were heading. When the Vix crossed back up through the Dow, along with a bullish moving averages realignment, I felt the risk/reward had shifted to the short side. When I look at the outlook for next week and beyond, I think we’re heading to new lows as many indicators I follow are just now rolling over, nowhere near being oversold. We may bounce early next week, but I think that’s what most traders will be hoping for to establish new short positions, so it’s unlikely that will happen.
Remember, the market wants to fool the most amount of people it can at a time. On Wednesday, 90% of the volume was to the upside. Do you think those traders were expecting a big reversal on Thursday?