A DISSECTION OF THE RECENT UNPREDICTABLE MARKET ACTION
An absolutely wild and unpredictable market to say the least. It's not easy to make large gains, medium sized or even small gains in this market environment. You have to take what you can get on any given day. The sharks are all hungry and the amount of fish remaining in the sea remains sparse. It's only natural that the sharks are now devouring each other in an effort to survive.
As you can see by my previous post outlining today's activity, it was quite an active day of trading. Active, I should say, by my standards. I try to take on positions that will remain in the portfolio for at least a week, preferably longer. However, this market has forced traders to adjust their time frame consistently during the second half of the year. I'm reluctantly adjusting to the conditions. Adapting for the sake of profits.
On a side note, it's going to be a spectacle watching traders adjust once the market goes back to trending for more than 1-2 months at a time. Everyone has become so programmed to sell 1, 2 or 3 day spikes and vice versa. Riding a trend is going to be a difficult task for even the most disciplined of traders. This will likely accelerate the trend as there will be a constantly flow of chasers on the way up or down.
My reasoning for covering a majority of the short exposure in the portfolio (still holding a 50% position in FAZ) was twofold:
1. The ability of the S&P 500 to hold 1230 during the final hour of trading.
2, The ability of the Nasdaq 100 to reverse a majority of its losses, closing near the highs of the day.
There is also the fact that the FOMC decision will be announced tomorrow. Recently FOMC days have coincided with lows in the market. Never mind the fact that this is also a triple witching option expiration week, making an already deceptive market potentially hyperventilate from over-deception.
If the S&P had snapped 1230 and closed at say 1225 today, I would have been comfortable holding onto all of the short exposure in the portfolio. The last hour acceleration off of 1230 to close at 1236 was a definite bullish victory in the face of what could have turned into a rout.
In order to get a feel of the market let's look at the charts of the UUP (US Dollar), S&P, NDX, and my newest long position in SLV (via AGQ):
click chart to enlarge
UUP
S&P 500
NDX
SLV
