Today might have a mild UP draft bias overall. Some groups could hold up better, such as Metals and Mining, Chinese stocks, some techs, etc.
Noticed the Forex market seems more active than normal this early morning. We see NY Energy and Metals up overnight… we should finally see some follow-through action in energy, with Mining and Metals acting well once again. It seems like this morning the buying is more broad based and not just in the stronger groups or sectors. Chinese ADR’s might do well again.
Here is today's live class outlines with pre-market observations and comments... will update live when your live class begins at 10AM....
If interested in attending our live class, click on this link each day, or bookmark the link.....
http://metastock.epopcentral.com/join.html?dn=RT
Here is an update on a recent CL trade... (
click here to see it)
I told people yesterday in our live class, even though we were all bullish, not to get caught up in the euphoria of newer highs because October can historically be a tough trading month.
I mention this because less than one day later I found myself caught in a trap of sudden unexpected selling where I had not been paying attention to because I was doing other work. I forgot to heed my own advice. When I scoured the news I really didn't find any information that justifies or explains today's action.
The last time this happened I publically complained and a friend forwarded a nice text that adds some insight. Below is an excerpt...
"The recent elimination of our short sale rule, effective in July, is the result of heavy lobbying, by hedge funds mostly, and some day trader types. But most of the day traders now, in a sense, are hedge funds.
Here is my take on it. When stocks go up, and the public, traders, etc., are accumulating, there are usually sellers along the way as a stock meets the value criteria for the holders. This is normal activity. When a stock is coming down, whether it is on news or just a market sell off, there are not that many buyers. Especially when there is news, people want to see how low it will go before they take a stand.
Put another way, you can take a stock down with a lot less pressure than you can take one up. That is just the way it works. You long time market workers know that. I am told that 60% of the positions in hedge funds today are short. I am also told that hedges make up 60% of today's stock volume. I personally feel like it is more like 80%. The hedges have over $1 Trillion in cash now, and that adds up to about 10 times that when you count the new way they can finance their positions."
I have been involved in the markets for a long time. Things change. Once you recognize it you are better able to deal with change and your trading improves. This market behavior is going to continue until someday the game played no longer works or until someone re-regulates the industry.
I am sharing this publically because I want to share a newer strategy I have been developing the past couple years that could help others.
Before taking a trade in an overextended trend, ask yourself how long has it been since that particular high-flying stock (or its group) has corrected? Has it, say, pulled back a minimum of 25% from where the rally first started? If not, you are entering a more risky trade due then you may realize. Secondly, ask yourself if that stock were to reverse strongly, suddenly, after you just entered a new trade, does it provide quality technical supports nearby on a daily chart, close enough to prop it up from what could become free fall selling pressure? If not, you might want to stand aside and remain more patient for cheaper prices. It is just a matter of time before cheaper prices will show up.
The longer it has been before a previous deeper correction, the greater the odds become a more severe sell off could be lurking nearby if someone with the resources wanted to make a point.
More and more, before I take any trade- even a Dynamic Trend trade- I always take a look at a daily chart to see if there is enough technical support to maintain price stability and integrity if someone wanted to put pressure on that stock. I make the following trade adjustments if a trend looks like it has extended with only shallow pullbacks for an extended period of time:
(1) take smaller new positions,
(2) trade shorter durations,
(3) I protect that position with tighter trailing stops,
(5) don't fully invest your account because you can use that money better if cheaper prices do come unexpectedly,
(4) and a final option, don't place the order until a deeper correction finally shows up.
There are times to chase trends up, and times to remain more skeptical. I am finding that by making these adjustments in my personal trading strategy it really is helping me deal with markets like today.