Believe it or not, the market is open right now.  It just doesn’t feel like it!

The indexes are hovering near the flat line as traders prove unwilling (thus far) to commit to a direction ahead of the main event of the day, the FOMC announcement at 2:15pm ET.  And honestly, why would they?

Neither side has reason here to become overly anticipatory.  The bulls have enjoyed an impressive run for 2+ months, while the bears have been shot down every time they’ve attempted to call for a top.  Both camps are better off sitting tight and waiting for some clarity before looking to make any moves.  The bulls can maximize profits by standing pat until a technical sell signal arrives, and the bears can wait for confirmation before taking action to avoid any more premature entries.

So far, I’ve closed out my swing trade in FLR (as per the email alert) since earnings are tomorrow and it came back down a bit off the open.  Day trade candidates SOHU and PENN from last night have shown weakness off the open, failing to trigger.  SONC gapped through my intended entry, negating the trade.  On the short side, AUXL and VFC have each triggered but have yet to really do much.  I’m looking to stay patient with them here as the overall market is currently still stuck in the range from late yesterday.

Overall, there isn’t a lot to do here.  There’s plenty of hype over what today might bring, but the bottom line is that it isn’t here yet.  Getting antsy ahead of the real catalyst is akin to overtrading, so be willling to exercise some patience here.  The real fireworks, if we see some today, will happen in the afternoon.  It’s also possible the market takes its time deciding what to make of the news, which could make for an eventful remainder of the week.  So we’re poised for some volatility expansion, but it isn’t here yet.

Trade Like A Bandit!

Jeff

The big move I said was likely coming soon from last night’s Broadcast is underway, although I must honestly say I’m disappointed in how it arrived.  I went home with a little long-sided exposure last night, so I was unable to catch the huge downside gap that greeted us this morning.  The short side has offered some follow-up opportunity since the open, but most of the move took place overnight and I simply didn’t catch it the way I had hoped.

Traders at this point often wonder, “what now?” The convergence of trend lines on the S&P (and others) is being resolved to the downside with today’s selloff, and it’s easy to think you can just short everything in sight and ride it down.  I’d caution not to take such a careless approach.

Yes, we have seen no buying at all today, and yes this is a technical sell signal for the market.  However, the dip-buyers have emerged numerous times in recent weeks to step in and offer some support.  They might stay away for today, but it’s unlikely given the success they’ve had since July 1st that they’ll walk away without a fight.  That could keep things tricky for the shorts, so be careful out there on both sides of this tape.

Here’s a glance at the S&P 500 chart and today’s trend line break:

Chart courtesy of StockFinder

In other news…

I was reminded today of the importance of waiting for entries to trigger.  The Hit List had one potential trade (ARUN) yesterday which never triggered, and another today with RDC not triggering.  (Both of those will be removed tonight after not triggering and seeing their patterns fail, by the way.)

My style is to wait for my trigger prices to be met before taking an entry, which does a couple of things for me.  First, it confirms that the stock is on the move as price clears an important level.  That adds confidence to the play, and reassures me that my thesis is (at least temporarily) correct.  Second, it prevents me from making anticipatory entries where my capital is tied up in a stock that may still be consolidating.  I want my capital at risk when there’s an expected reward, not a 5-day waiting period.

Traders who took entries in those names either yesterday or today are underwater, and that’s an excellent reminder to wait patiently for signals to fire before taking entries.  Remember, we’re trading for profits, not excitement.  If you find yourself chasing the latter, you’re barking up the wrong tree here.

One final reminder today’s action offers is that it’s important to ring the register on nice winners while the profits are there.  We’re here to trade the market, not discover the next big thing for the coming decade.  That means we exit when we know we’re wrong – quickly – and, we take some off the table when we’re right.

The move in SOHU was excellent – over 10% in 3 days from Thursday’s trigger last week to Monday’s ramp higher.  I love when that happens.  And I’m long gone from the trade at this point.  I happened across it today, and in case you haven’t noticed, it gave back that entire move and then some.  Those who were greedy and hoping the unsustainable strength would continue, even just a little longer, are now confused and frustrated.

Here’s a glance at the huge run and reversal in SOHU:

Chart courtesy of StockFinder

So here’s the deal… Commit to staying disciplined and patient.  Wait patiently for good setups to arrive, and wait for them to trigger before going in.  Have the discipline to shun greed when it knocks on your door, and make those gains real when you have a nice winner.  Methodically book profits in good trades, and keep on moving.  This market requires it.

Trade Like A Bandit!

Jeff

Brand new month, brand new week, and apparently, a brand new habit for this market.

I’m talking about the fact that we’ve now seen the 2nd dip get bought.  Last night I noted how well the market had held up last week with the finishes well off the daily lows, indicating that there was some buying interest out there even on the pullback.  I’ve also noted lately how healthy the dip has been – simply because uptrends need pullbacks in order to continue.

The strong opening gap we saw this morning paved the way for additional strength to kick in, and it has.  Early gains have been added to, and as a result, the indexes are making excellent moves.  The DJIA is leading the way through the June highs, while the NAZ, S&P 500 and RUT are each approaching their next key levels.  Stocks which had been basing are breaking out today, adding to the bullish tone we’ve seen of late.

It’s important to remain patient here though, as chasing prices higher isn’t necessary.  The key indexes (NAZ, S&P 500, and RUT) all have some proving to do before they can be considered to have “broken out,” plus there will be some back-and-forth to offer additional entries going forward.  Nonetheless, today’s action is very positive, so I’ve got no intention of trying to fade it.

As for individual stocks, many of them gapped beyond their technical buy points today, making it tough to get ideal entries.  That was one hesitation I had in last night’s Broadcast, as I didn’t want to have to pay up for good patterns.  MOS from last week had poor news and filled the gap, and has since moved deep into positive territory on the day, so I really like the action there.  I’ll elaborate on today’s action there in tonight’s Hit List.

Stay patient out there, don’t short this market, and be willing to wait for good buy setups to arrive.  They will come.  Great trading in the current market environment isn’t about buying into 200-point advances, so if you aren’t as long this market as you’d like to be, you aren’t alone.  Level-headed thinking, patience, and taking trades with the proper risk/reward is what makes the big difference by the end of the year, so keep that in mind if you feel like you’re underperforming today.

I’ll be discussing today’s move further in tonight’s Bandit Broadcast, but wanted to put out this post ahead of the closing bell to comment on today’s very positive price action.  A solid finish would confirm the lift we’ve seen so far, and bring forth the possibility of clearing the intermediate (June) highs in the days to come.

Trade Like A Bandit!

Jeff

With just about 1 hour left in the day, the S&P 500 is currently through the 1050 level, which means if it were to close right now the uptrend line from the March low would be broken. [Read more…]

Periodically, I’ll be doing a mid-day update here inside The Bandit Hideout for those of you who are watching the action intraday.  I might share charts of interest or comment on the trading conditions, or take a look at the averages and what’s taking place out there.

Today we sure aren’t seeing much.  The early positive tone has been maintained as we get into the afternoon, but there really is no momentum to be found in either direction.  We’ve seen the market stay positive but range-bound, making for limited opportunities.

The indexes are still mixed when it comes to their key levels, as the NAZ is floating beneath the 2150 level (needs a close above it), while the S&P 500 has pushed through 1074 to get within 1 point of its intraday recovery high set a few weeks ago.  And the DJIA has made a new recovery high today.  Thus, the V-shaped bounce from the recent pullback continues, but not at a very hot pace today.

With it being a holiday, the volume certainly feels lighter, and that’s being reinforced by the lack of movement out there.  I’ve taken only a couple of daytrades, booked 1/2 profits on my AIV swing trade at the 1st Target (6.8% profit), and initiated a short sale in SNDK for a swing trade as per last night’s Broadcast, which is still hanging around the $21 area as I type.  I’m laying low for now though, as this is the kind of environment it’s easy to get chopped up in.

All in all, it’s definitely a day to be selective.  Doesn’t appear that either side is interested in making much headway today, at least not yet, so I’m taking it easy with new trades unless and until some afternoon momentum arrives.

See you tonight with the Bandit Broadcast!

Jeff