The Day that Was - August 23rd 2007

The day that was ended up being the day that was not. Nothing happened today. The markets had no momentum to advance any further. A few times it made attempts to move through resistance but failed each time.

There is only so many times it can keep testing resistance before the buyers give up. Each time buyers tried to advance the markets there were sellers waiting to take their money and sell it back down. After a while buyers give up trying to put money in only to see it be taken away as soon as they buy.

The S&P ended the day today with a doji pattern which signals indecision in the market. When that pattern prints after an advance it is usually followed by a downward turn.

Yesterday I said that the markets were right up at resistance and that is why I did not take any long positions. Why take a long position right up at resistance when the chances of it being turned around were high. Risk vs reward is always important. Don't take a trade on a stock (or the index) is running right up to resistance, chances are that your buy will go no where and it stands the risk of being turned back down hard. Let the others in the markets make the push through resistance, retail money like you and me in the markets will not move resistance. Only institutional money and other large money movers can break resistance levels. Best for us to stand back and let them clear the path for us, then we follow.

I also stated last night that based on the charts that the resistance was significant and that the market was facing a key test. Today the market failed the test, it could not open the door and move through. Leaving the possibility of a downward move in the making.

We can't always predict with 100% accuracy which way the market will go all the time. But as traders we use what appears to be the most logical path based on the charts to our advantage. We base our risk to reward on the charts. If the downward path has less resistance then the upward path, and you want to go long on a stock then your reward potential is low and the risk for loss is high. So we wait for better odds. Simple as that. So while others are buying and selling every day trying to fight this market here , and losing more money than they are making we wait for the risk to reward potential to be in 'our' favor. Not the markets.

Tomorrow will be another day like today. At the moment the Asian markets are down. How this will propagate into our markets tomorrow remains to be seen. One chart I did check tonight was the 10 year T- note yield. And yet again the 'flight to safety' continues. More money flowing into bonds as they feel the risk to reward ration is better in bonds then in stocks at the moment.

This morning I posted good stock picks to go long on if the market rally upward with strong strength. And I also posted stocks that would be good shorts on a big market sell off. Those stock picks remain valid. But they can't be held as swings, they are only for the experienced day trader to utilize. Swing trading in earnest has not yet returned to a safety level in our favor. There are still signs of another leg lower in the market (even lower then what we have seen so far).

Have a great evening Rebels..