Suddenly, Everyone's a Day Trader

by: Trader Mark November 25, 2008 | about stocks: SPX    
Trader Mark

Trader Mark

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Since this market has reduced everyone to a day trader and the most important hour of the casino is soon upon us, I have some simple levels I'm looking at. Despite the crazy volatility, technical analysis actually has been working quite well of late, which is a wonder.

On the way down we had support at S&P 870, then 840, then 770. So each level that breaks turns from support to resistance. Right now after a huge move the past two days, we sit in between two of those levels: 840 and 870. A bear can look at this chart and say the move is nearly over and we are now at the resistance level (20 day moving average) that has been the ceiling the past few months.

A bull can say, this is some very minor consolidation after a huge move up. I have no skin in the game since I'm quite hedged. We will let the price action dictate to us where to go next.... between 840 and 870 is no man's land to me; I'm neutral here. A break below 840 would get me leaning bearish and a break above 870 would get me leaning bullish. Again these are on a closing basis... so 4:01 PM is more important than 3:51 PM. (and in that time frame this market can move 3%)

It's really as simple as that. This market is all about sentiment - the news is bad and will continue to be bad for a long time. That doesn't mean the stock market will go down 12 straight months. Hope is not an investment strategy but hope will from time to time pop up - we are in another period the past few days where "hope" that the government will save us has once again resurfaced. This has happened many times the past year and a half, only to be followed by disgust when we see government revealed for what it really is.

The hope now is that was the "old government" and the "new government" will actually have (a) a clue and (b) act in the people's interest rather than the corporations. That would be a huge leap but the point is... perception is reality. News does not need to be good; just the perception that the future is better and people will look through the abyss.

So I can post those thoughts today, next February, next June, and next October. They will remain the same as I believe the economic slog will be long, and worse than people believe today. But we'll have rallies along the way.

None of our "conditions" have improved as what we're looking for is a sustained rally, but all it takes is a week of good action and a lot of people on the sideline will rush back in not wanting to miss the party. I find it fruitless to make predictions so we'll just let the price action dictate to us. But again, if I saw this chart I'd be leaning bearish until proven otherwise. Frankly, I long for the day when I can start talking about individual stocks and sectors again - and it actually means something.


The witching hour approaches; every hedge fund trader in America now is about ready to put in his one hour of work.


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This article has 9 comments:

  •  
    Nov 25 04:50 PM
    I never did see the logic of buying only after the market moves higher, and selling only after the market has moved lower. Why not just make a decision and take a stand now rather than allowing the opinions of others to determine what you do (but only AFTER you have left a few percentage points on the table, and have exposed yourself to the risk of getting whipsawed...)

    I have actually done very well lately by BUYING after the market has moved LOWER and selling AFTER the market has moved HIGHER!
    Reply | Link to Comment
  •  
    Nov 25 04:56 PM
    There is no such thing as day trading anymore. The last five minutes of the day is more like Henry Bibby coming down the court with ten seconds left on the shot clock. Who do you pass to? Do you take the shot yourself?
    Reply | Link to Comment
  •  
    Nov 25 08:03 PM
    Not "everybody" is a day trader. The volume in the last 30 min with 3-5% moves in 15 min indicates that these are professionals (investement banks or hedge funds) moving the market. I also noticed daily rotation in sectors being sold off. Like today it is commodities and industrials, tomorrow it is financials, then restaurants and retail. I wonder if there is collusion among them or do they simply act on the cue from each other using programs. I feel like they intentionally move the market, make their money and get out.
    Reply | Link to Comment
  •  
    Nov 25 08:37 PM
    Actually there are many of us who are completely paralyzed and not trading at all.
    Reply | Link to Comment
  •  
    Nov 26 11:47 AM
    Haven't seen a knife fight like this since Westside Story.
    Reply | Link to Comment
  •  
    Nov 27 03:16 AM
    LOL @ Here's a thought.
    Reply | Link to Comment
  •  
    Dec 14 01:53 PM
    Just a couple of thoughts about the changing day trader perspective:

    1. CNBC article - They're Back: Day Traders Thrive in Volatile Market:

    www.cnbc.com/id/281584...

    2. I carefully read the above commentary and suggest it may not be the news, the action at the close, the trend, buying after the high, technical analysis, or volatility that a day trader needs to be most concerned about to be a consistently profitable winner.

    Give the following some thought:

    1. Trading with a consultant / coach - give up trading on your own.

    The consultant can get you on a winning track.

    The coach facilitates learning the day trading game, to regain confidence, build competence, and produce the results you aspire.

    2. Trade in a winner's day trading room with your coach at the ready to provide support and guidance to quickly learn to win.

    Like world-class tennis players with their coaches, it's all about winning, not the money (purse, sponsorships), while playing the game.

    3. Trade a game (system) that's at least winnable.

    The game has changed (the purpose for trading, the rules, strategy, tactics, when to trade, and when not to trade, and so on) in the past few years, completely, and forever.

    If you persist in trading old-school you will soon find, if you haven't already, that you are on a dead-end street to nowhere with regard to profitability.

    The old game is interesting, keeps you busy, and is pervasive throughout just about all the Internet offerings, but it's now obsolete. You need proof? Check your balance sheet.

    The day trading game has changed, so have we, and so can you.

    Good luck with your day trading,

    John McLaughlin, Stock Trader - Consultant / Coach / Mentor

    www.DayTradersWin.comj

    949-218-4114
    Reply | Link to Comment
  •  
    Dec 14 01:54 PM
    Correction:

    DayTradersWin.com
    Reply | Link to Comment
  •  
    Dec 28 09:05 PM
    On the plus side, the prices of equities are actually affordable. For good ones. That means more people can participate, if they can be sold on the idea of gambling. I can buy former blue-chips at prices cheaper than lottery tickets. And they're less risky than lottery tickets.
    Reply | Link to Comment
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