The Trend Bends

Damn, I feel much better after today's action. We got confirmation today- the trend has bended, and it seems likely that there will be another leg down. See, unlike Vick, I don't really have a dog in this fight, (well, maybe a small dog) and so if the market falls, it does not destroy my account. Since I have about 70% cash, I can watch the action and remain fairly detached. I have to admit my stress level is declining, and I'm getting my goals met at work. Also, I like it when I paint a scenario and it actually plays out the way I paint it.

Let's look at a chart of the Nasdaq. You might wonder why I prefer the Nasdaq over the SPY or Dow. Well, many believe the Nasdaq leads in and out of rallies and corrections.

It is clear that today was a HUGE reversal today. That is one UGLY candle. However, the market internals from today were not as bad as one might think. I do not think it was a capitulation day. Based on the MACD and the RSI, the capitulation day may come tomorrow. Be careful though, as this trend is shaping up to be strong, and may need some time to work off the downward momentum.

Another 100 point decline will give the Nasdaq the 10% correction that the bears are rooting for. Honestly, what is another 100 points after last week's clobberage?

I still think this is a difficult market to trade. I'm staying away from individual stocks (unless one just screams to be traded) and sticking with the inverse ETFs. Today I picked up 200 QID and paid around $45.50 for it. If I can even squeeze a couple of points out of it, I'll be happy. After all, if one can preserve capital during these corrections, and then employ that capital on the rebound, he or she will do well. Any money made on the drop will be icing.

The key points here are that most indicators are showing a market that is near oversold. However, the volume and overall strength of this move could keep the market in oversold territory for some time before a tradeable bounce occurs.

Today I also closed out my ANAD position. I bought 200 more shares on the dip, in case the day turned out to be a buying opportunity. When it became obvious that the market would reverse, I sold all 500 shares for a small loss. I also bought and sold 200 SWHC for a wash.