Tuesday, January 04, 2011

Market Thoughts

Today's big rally decimated our alert list (we had 8 long trades trigger including our best set-ups that we had been stalking for weeks, including NTAP 56, VMW 92).   As a rule we never go counter-trend if we have a lot of alerts that still have yet to trigger, i.e. we never go short if our list is full of long alerts that haven't triggered yet.   However every once in a while a big rally empties our alert list such as today and when that happens we give ourselves the green light to go counter-trend.  We're expecting choppy action going forward (also note the divergence between market and commodities today which printed some exhausted candles) and are in scalp mode with a focus on shorting euphoric spikes up.

However all this being said: even a few days of flattish action would set up a number of new long alerts.   Definitely too early to call a top but can't be blind either to signs of a tired, extended market, especially if you have a very short time-frame such as we do.   Traders with longer time-frames have less to worry about as the market could simply base before grinding higher. 

ANR, one of our favorite trading stocks,  a good example of what we're talking about as it printed a gravestone doji today:

When we see exhaustion moves like this then we often go short for daytrades.  Not shorting weakness, but shorting euphoric buying as panicked longs chase exhausted moves up.

Huge run on ANR -- and extended from the base at 56.5 (where we had alert on the HCPG newsletter last week).