Sunday, August 14, 2011

My watches and some thoughts on the market for Monday...

Although we are at a very tough juncture in the stock markets all evidence points to continued downside! Look at the daily chart of the SPY's below; we see that the markets are clearly forming lower highs and lower lows in addition to the 10 day SMA being below the 20 day SMA with both pointing sharply lower.

In addition to this, my major market timing indicator of intermediate term trends the T2118 shown below  continues to stay red and below a down trending 10 day SMA. 

So from a swing trading perspective (I am primarily a swing trader who day trades swing set ups) your focus should be on finding and trading bearish set ups or staying in cash if you are not comfortable doing so. We are in this game to make money not to be heroes. So there is absolutely no need to try to anticipate the bottom. Simply wait for the averages and the markets timing indicators to start showing when trading on the long side will have an edge. Right now for swing traders the edge is in shorting. Just as there are dips in up trends so too are there rips in down trends. Although the rips in down trends might be sharper than the dips are in up trends as a swing trader you'll be better off ignoring these rips and focusing on the intermediate term trend. Trying to time these rips is similar to trying to time the dips in up trends which is very very tough! The money is usually made by focusing long in up trends and the same applies for down trends.

Here is how I am positioning my self, I am bearish biased of course so most of my set ups are bearish but I do have a few reasonably attractive long set ups in case we get a day or two of further up side next week. Here are my watches:



I also recommend keeping an eye on these ETF's:  $DGP for a long if gold bounces and $ERY and $DRV if we get a pull back in the markets.

Good luck and good trading!

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