Bounce will be a mirage
Any bounce here will be a temporary respite. It is likely to be purely a short term phenomenon. Unless you are very nimble and can quickly grab the profit from such move in a day or two, it may not be worth playing it.
Market will take time to stabilize and form a meaningful bottom. At current stage I see no quick resolution to the situation. Bounce or sideways move here will have high probability of failure. The move so far has seen no buyer exhaustion, in fact if you look at the 4% plus numbers , there are still buyers active in the market.
Better buying opportunities will appear after some time. Currently many more stocks are still in early stages of their breakdown and the bounce will in fact create better and low risk opportunities for shorts.
Many of those who are clamoring for bounce are 1 or 2% kind of players, who operate on very short time frames and use trading vehicles like futures or options. So copying their style in a very volatile and tricky market can lead to big losses. Many of the dip buying based systems have low per trade profitability and occassional big losses or blow ups. Many of those kind of traders must have taken big beating in current environment and we will know about them in few months as more tales of blowups start percolating down.
Market will take time to stabilize and form a meaningful bottom. At current stage I see no quick resolution to the situation. Bounce or sideways move here will have high probability of failure. The move so far has seen no buyer exhaustion, in fact if you look at the 4% plus numbers , there are still buyers active in the market.
Better buying opportunities will appear after some time. Currently many more stocks are still in early stages of their breakdown and the bounce will in fact create better and low risk opportunities for shorts.
Many of those who are clamoring for bounce are 1 or 2% kind of players, who operate on very short time frames and use trading vehicles like futures or options. So copying their style in a very volatile and tricky market can lead to big losses. Many of the dip buying based systems have low per trade profitability and occassional big losses or blow ups. Many of those kind of traders must have taken big beating in current environment and we will know about them in few months as more tales of blowups start percolating down.
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9 comments:
Pradeep,
I've liquidated my long positions. I strongly doubt there will be no strong rebounce.
Semsons
I bought GHM today. 100% EPS EP candidate from last week.
I don't know Pradeep, there is much more upside from here than downside, methinks, even if you are not a daytrader. Playing the intermediate term over the next few weeks of course.
C (citigroup) rallied 7.5% off the low and closed at an 8 day high closing above the highs of the previous 7 days! Thats an amazing move for C, very rare. Also check out the volume bars on BSC (40% float turnover in the last 2 days). That could be capitulation on BSC which should bode well for the market stabalizing here even if it doesnt rally right away.
"I have spent six year looking for common fundamental thread in this list. My conclusion is only around 30% of the stocks are driven by fundamentals.
The only reason to buy these is because they are going up. That is why it is psychologically difficult to trade."
Just found this comment written sometime back, is the momentum really the key driver to future gains? If that is the case, do long ideas need to be confined to 100% EPS/ 5% sales?? Can you create a mechanical strategy allocating a % capital, trailing stop, etc and get similar results or does the fundamental filter increase win/loss percentages? Thanks!!
First time in this correction the Market monitor is showing sign of stabilization and probable buy signals with 4% plus at 408 and stocks up 50% or more in month at 3.But with 335 stocks down 4% plus , there are still active sellers.
So for momentum based systems like Double trouble or IBD 200 plus, I would like to see another 200 plus day on 4% plus.
F
Market might be up by year end, the intermediate trend might still go up, but all that will get reflected in Market Monitor.
Market Operator
In the 100% plus universe, fundamental filter adds no value. Yes one can trade it purely mechanically for a swing trading kind of system with few weeks to months holding period.
The IBD changed the market status back to "confirmed rally," but I'm with you Pradeep, there was still a lot of selling going on today.
Thanks for running this blog, I appreciate the opportunity to learn from your experience.
I do agree that we are likely to see another test of the bottom. There were a lot of calls but yesterday showing speculative sentiment that will probably be shaken out. We probably won't have to wait until year end to see a higher market though.
Volatility will probably drop dramatically in next few days with seasonal tendency and indexes will chop and test the bottom. We could see new highs in or by September.
I am long term bull, it is only in tactics that I have different opinion and philosophy. Buying aggressively in such volatile market for longer hold requires larger stop. In a couple of days once this volatility settles down, one will find good longs.
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