Referring back to my last two posts on the Stock Market, August 29 then the one following where I said the mood had changed, it is time to admit to being wrong. I pitched my SH short position 2 days ago and took a small loss. As a trader there is a time to admit when you are wrong, and quickly head to the sidelines. This is how you survive.
The last minute rally before the holiday on the futures buy program by what appeared to be the PPT was my first alarm. I actually added at the close that day in case it was not the PPT. The very next trading day it was proven to be them by the price action. At this point also if you look at the chart, Sentiment has gotten pretty negative, a bullish sign. Also, my hybrid indicator of the COT report has moved back into bullish mode. Also, we have had yet another sell indication, the red vertical line fail.
When you get failed sell signals it is simply telling us not to sell, kind of obvious right? In all seriousness, when a series of sell signals fail, that is a buy signal in my view. I am still of the view that this market is being almost completely held up by the US government right now, which makes me fearful of a downside air pocket at any time. Since it is being done for political reasons surrounding the health care debate, they could let it drop any time to make a point if the bill appears to be going down.
This is overall as a result, just a treacherous environment to trade in, one of the most difficult I have ever seen. I will still be looking to see if another sell signal shows up, but will be very demanding of it at this point. We are almost at the point where the last trade trigger I use is going to turn up, which will eliminate sells entirely for awhile. It has not done so yet but will in a few days if we do not get a decline.
Net Net, I am now flat, and if yesterdays low gets taken today I will likely re-enter a short side position. Barring that is it time to be on the sidelines here.