Zig When They Zag

If you sit and listen to financial radio, or watch the talking heads on TV, when the market has a down day, they all say we are headed lower and you should be taking profits. When the market goes higher they all pound the table saying the market is going to explode. What would be fun is to tape their shows and play them back the next day instead of watching/listening the live shows for that day. They might get it right.

We are in a trading range and nothing else and you have to play it that way. Like the Stooges, you have to Zig when they Zag and you have to Zag when they Zig. It is hard to stay disciplined and do it but that is how the market is being run.

Today should be an opportunity to sell into strength. when we get back down to 895, an opportunity to cover shorts or buy into weekness. This will continue until we get seriously into earnings season and that will dictate which direction we go.

Why Some Technicians Are Confused

I am a bit surprised by the confusion I see some of the market technicians having. Both professional and amateur. They are tending to change their predicted direction of the market daily and getting it wrong almost every day. Not all of them, but quite a few.

What I find is, we are seeing the market becoming more of a short term play by retail and professional investors and thus, technicians are using hourly and even minute charts to track out their trend lines and waves and analysis.

I am not a professional, but stick an hourly chart in front of me and you may as well give me a fork to eat tomato soup. Its a tool, but it isn't really helpful.

Looking at any daily or weekly chart, there is enough evidence that the market is exhausted. But it does not mean we are headed down from here. What it means is, on every move up, it just creates a better shorting opportunity. You have to sell on any strength and we are probably going to stay in a 890-925 range until earnings season so don't expect a big move before then.

The VIX is bouncing above and below the 20 ma and I think think is signaling that the mountain is going to blow but when? Wouldn't we all like to know...

We Won't Be Fooled Again

Don't assume this is a big move down. This is a perfect scenario for the market makers to pull in bears who think this is going to be a big move down. We are at some key resistance/support levels on the market and in key sectors. The market can go either way. Better off waiting for more data and more confirmation.

I believe we are in a trading range which has just widened and you have to play the market that way. Buy on big dips, sell on big moves up. Could be a fun time ahead for traders.

Whiplash

The VIX seemed to be on its way for a nice run above the 20 dma mid last week as it vaulted and confirmed the move on Tuesday. But a slide Wednesday thru Friday put it right back to its lower resistance line of 28. A break of this line would appear to tell us the market is stabalizing or going higher, not lower.

It is very difficult to determine the direction of this market right now so caution has to be taken. I continue to stay away from U.S. securities. I like emergining markets very much and I really like Nat Gas via UNG for a longer term play.

TBT seems like a nice buying opportunity here. There is plenty of support at the 51-52 level so downward risk is very low and upward potential is very good.

KRE has a pretty clear bearish looking chart. I am playing it short but with stops at 21. If it were to hit that number, the 20 dma may re-cross the 50 dma and i don't want to play that game. But I suspect KRE is a pretty good short here but maybe stabalize in the short term. 3 months it should see 15 or lower.

If you want to believe the hype of the smart phones, go right ahead. I really wanted to short RIMM last week due to its incredible run creating a bubble. But I just did not have the guts since it is a risky play to get in the way of a runaway train. I think RIMM and APPL are both headed for a correction. Apple wants you to believe there is a mad rush for the 3Gs and there is good sales, but it is not in the order of magnitude that the stock price would indicate. I went to an AT&T store today about upgrading one of our phones. I asked about the iPhone sales and they said they are good but it is not nearly as powerful as the intro of the 3G. Just one data point but I have heard the same about other stores.

Watch the dollar. The dollar and energy will drive this market one way or the other. I believe a weeker dollar will be good for TBT and UNG and perhaps not so good for the market.

Happy Fathers day and good luck in this very difficult market.