Stock Trading

Market Update 10-04-14. Check Out That Weekly Chart. Wow.

Tops can take a long time to form. Longer than you might think. Just look at 2007. Along this same line of thought, trends can also last a lot longer than you might think. Which prompted John Maynard keynes to say: Markets can remain irrational longer than you can remain solvent.

Is anyone going to argue with him?  I’m certainly not.  Especially when my own market experience aligns 100% with that statement.

That’s why, in my opinion, the best part is always the middle.  In the middle (even if you don’t know you are in the middle), price is going up.  Your trades are working out.  And trading seems effortless.

The problem happens when you slam right into topping patterns or a consolidation pattern. When trades stop being so easy.  When not everything works out. This will test the resolve of even the toughest veteran.

With that said, let’s take a look at the charts for the week. As I trade low priced, small cap stocks, I look at the IWM, which is the ETF that follows the Russell 2000 Small Cap Index. If you trade large cap stocks you may want to look at the SPY.  If you trade tech, you may want to check out QQQ.

HOURLY

iwm hourly

We won’t have much trouble figuring out the short term trend here. It’s down. If you were short last week then you fared well. If you were out last week (like I was) you also fared well. If you were long — not so well.

DAILY

iwm daily

The daily chart is also below the 50 day MA which is not good for intermediate longs.  If the downside continues I’m looking for a target in the low 90’s.

WEEKLY

iwm weekly

And here we are, the weekly. To me this market screams pivotal moment.  First, it’s also below it’s 50 moving average which is not good for long term longs, and puts all three time frames in downtrends.  Second, we’ve been going sideways for nearly a year now.

To me that means something big is on the horizon.  If we find support here we’ll have a lot of stored up energy for the next leg up.  Of, a little scary scenerio, we crash through support and this wild uptrend comes to an end.

Don’t get me wrong.  I think we need a correction.  But do I want the uptrend to end?  Of course not!  It’s not hard to see why, at times like this, I like to sit out. Sometimes, if the situation is right, I might take a long — but that’s only if the chart looks really good, and even then, I do that with 1/2 sized positions.

TREND SNAPSHOT

  • Hourly – Down
  • Daily – Down
  • Weekly – Sideways/down

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