Friday, December 04, 2009

Stock Market - Four Weeks Of Choppy Trading



These past four weeks in the stock market have been extremely choppy and I think the above chart tells the story. Above is a 60 minute chart of the S&P (SPY) and as you can see this has been a trendless choppy market. Whether you were bullish or bearish it didn't matter because the market found a way to take you out of your trade assuming you are a swing trader who is holding overnight.

I placed circles where large gaps have taken place from the close to the next day's open and as you can see we get one of these large gaps about once every 3 days. Today we saw stocks gap open substantially higher only to fall and go negative on the day. By the close stocks were back up slightly but only after whipsawing many traders.

When I see this type of trading I usually cut back on my trading size which I have already done but I am still short this market but not to the same extent as I was two weeks ago. I have lessened my share size considerably but have no problem stepping up to the plate and adding to my short position once a clear trend to the downside develops.

3 comments:

ben said...

There are valuable lessons to
learn from you but I cannot
push the trigger to reduce my short positions. This is not a tradable market. The S&P future
is 3 points above cash value at the close today. Traders are anticipating gap-up over the weekends like what had happened in the last 3 weeks. The EUR/USD normally trade the opposite of S&P but today EUR/USD drops to the lowest level of the session but S&P did not follow. The divergence indicates many people are still very bullish about S&P.

Anonymous said...

Excellent post , I for one have felt it near impossible .

Kevin said...

Kevin,

NYSE AD is holding up well and looks like its about to break out:

http://ttheory.typepad.com/files/latest-t-theory-chart-and-data-30.pdf

Do you have a view on these data?

I am short the tsx & long USD.

Thanks

Kevin

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