Trading is Fun, Trading sucks, Trading is.....

My intent was to get a video out to you tonight, but there is simply not enough time considering the research I’m trying to get done. I’m busy Scanning, back testing, and tweaking indicators to get in line with market action. I don’t have to say how bad today was and I won’t say, “I told you so” because specifically, I didn’t. However, just about every set of videos that I’ve put out the last month or so, I’ve gone out of my way to include market breadth indicators and if you flip back through the blog and take a look at some of those videos, you’ll see just how bad this market was looking even as it was making new highs.

Today the Dow was down almost 450 points at one point, simply incredible. I’ll never get used to seeing those kinds of numbers. The hardest hit sectors included Steel STQ -5.69%, Airlines XAL -4.50%, Gold XAU -3.96%, Energy XLE -3.76%, Housing HGX -3.40%, Brokers XBD -3.40%, and Media -3.22%. However, the pandemonium was to be seen in just about every corner of the market-Major Industrial Sectors, no gainers. Dow, one gainer. SP-500, 20 gainers. The SPY put in record-breaking volume today coming in around 464 million shares, about 164 million more than the previous record. The volume today suggests that we may be at a turning point, as does the VIX. The VIX put in a new record for the year.

Sentiment tonight seems to be firmly in the corner of a bounce. The market can become oversold in a single day as it did today. There are plenty of signs that point to the inevitability of a bounce, however, there is no way to qualify the point at which oversold is oversold enough. In other words, the market can and does go on making new lows, driving itself deeper into oversold territory. You are better off picking your nose or groping her bottom (wink, wink Chelobes) than trying to pick a bottom. It makes me nervous to get on board with widely held market sentiment. The market’s sole existence as far as we are concerned, is to take your money and it does that by making the most people wrong at any one time.

That said, the VIX is in rally turf. Volume today was overwhelmingly heavy which is a common occurrence at turning points in the market, and perhaps most significantly we are at month’s end and about to see a rush of new money flow into the market. These all bode well for a decent bounce. Here’s the catch, significant damage has been done to the Financial sector, along with many others. In my opinion, a bounce WILL setup a new round of selling and short selling. I know many of you are itching to get into the fray, as am I, but you are probably better off playing it cautiously until things are sorted out a bit more. As evidenced by the VIX readings, volatility is running very high, this means that price swings (market swings) will tend to be wide and wily so unless you have a lot of time to sit in front of a monitor and are willing to set wide stops to avoid being whipped out of a position, you may want to go away for a 3 day weekend.

We did have a couple of ideas that bucked the trend from the recent subscriber list-BDCO for example broke out today on high volume, up nearly 13% intraday and closing up about 6.5%, also up about 10% on the week while its industry group was down 6.39% for the same period. Or MDF from the July 10 list, which is up around 10% and as much as 25% a couple of days ago. This one is also worth a look again on this pullback. There were also a few right inline with the trend, NUE and STLD were both shorts from the 7/10 list and have lost about 17% and 10% respectively on this leg down. TWM was a long call on the same list-note how much better it has performed than QID.

Looking ahead, XLE, XLI, XLK, and QQQQ have performed well the last few weeks and all of them rallied off their 50 day moving averages this afternoon. XLU and XLV are both at their 200-day moving averages, take a look in their corresponding industry components for some bounce ideas. XBD is also worth a look, although it sliced right through its 200sma. A few names I came up with tonight in this group that I feel have a decent chance to bounce: MER, GS, LEH, MS, LTS. Many, if not all of them, have 3C positive divergences cooking on the intraday timeframes. In a broader sense, Financials in general should be on the watchlist as they have been absolutely decimated. The key here is the surging volume of the last week, something tradable may emerge from all of that.

Airlines took it on the chin today and there is a fair chance of seeing some bargain hunting over there. CAL put in a nice hammer today and it does have a nice 3C positive divergence working in its favor. CHINA put in a doji today on increasing volume, there may be an opportunity there. GLD put in a hammer around 11am on big volume and then went on later in the afternoon to rally, I’d expect to see some action there. Along those lines, BVN pulled back 2.10% today and held up thus far at support on huge volume. SMH also found support today at its rising 50 day moving average around $38. I could certainly see this one being a favorite of new money considering its technical positioning.

Well, I’m getting to the point in which it would have been easier to just do a video so I’m going to sign off. Don’t forget to checkout the recent posts, videos and links posted below. Thanks to all who have signed up for the subscriber list and thank you to those of you who recently made generous donations via the Tip Jar-and one very nice on in the mail, very much appreciated (check your email MD). Don’t forget that Trade Guild is a Worden affiliate so if you decide to take them up on their 30 day free trial for TeleChart or decide to give Blocks a try, please use our links and let them know where you heard about them, right here. As always, I really appreciate any efforts you guys make to get the word out about our blog, links on Yahoo, friends, whatever-it all helps. Thanks so much, it’s you guys that make this place useful, a lot of great ideas by the way from everyone on the Tagboard. Good luck, have a great weekend-maybe I’ll get to the video then…