All in the Timing

Around 2:30p.m. EDT yesterday, just as most macro and short-term players settled into their shorts and the notion that this bear flag will break to the downside, a Financial Times article conveying that the Chinese will be buying Italian bonds ignited a rally. The S&P 500 rallied almost 30 handles from the lows, driving some uncommitted shorts to cover and pushing the more committed to their limits. Those in the more bullish camp, thinking this was a constructive day, might have taken some of the 20 green go-to stocks overnight as a long, considering the reversal and close on the highs with some volume. Today we come in down 10 to 15 handles on the S&P futures, with some short-term longs trapped from yesterday's reversal, and those who covered some shorts, as it was a somewhat prudent thing to do, are digging deep to see if they have the endurance to try to short again for a close below the 1135-1140 level, which would be a continuation of this bearish action for another leg lower. All I can say is you must know your time frame. People that read my note use it to manage billions (or just scalp!); everyone can take what they want out of the content. Those having success scalping were able to make money both long and short yesterday/recently as a super scalper. Those buying the go-to stocks that act well whenever the market ticks up for a macro long must have a long-term time horizon and only be in tier one, considering that the lows of this market might not be in this year. Those looking to accumulate a short position as the market maneuvers this lower range must have super conviction in order to stay with the trade and know that the markets need to close below 1135-1140 and then 1101 for to take another leg down to the 1020-1050 area. Figure out your time frame and stick to it. I would say that less is more if you can't handle the swings. We are in unprecedented times and the pros don't even know what the conclusion will be to the European saga. In my humble opinion, I think three to five countries could default and be forced to leave the union. Question is, How will the markets treat the news? Is it priced in? Or do we need to go down another 100 handles or more? I don't know so I will take the form of super scalper until I see more clarity. I don't manage billions and have a mandate to keep money working at all times in this market. I can pick and choose spots and trade/position when I see an edge. Lately, it's been very random and not based on the probabilities on which technical analysis usually relies. Live within your means, and trade within your means. That's the only way you can stay safe and profitable. The stronger stocks in this market that continue to hold up are the ones I've been listing. See if any of these go green for a cash flow trade or more: Apple (AAPL) Amazon (AMZN) Baidu (BIDU) Google (GOOG) VMware (VMW) Wynn Resorts (WYNN) Las Vegas (LVS) Green Mountain Coffee Roast (GMCR) Crocs (CROX) Deere (DE) Colgate-Palmolive (CL) Take a look at the chart from Aug. 3. At that point, I was pounding the table about the head-and-shoulders pattern for about a week. Most of my community was already in cash, waiting to get short for the 1245-1255 break. Indices broke that day and then reversed and closed on the highs.This forced most traders who were short for the big move lower to cover. On Aug. 4, the market opened down and never looked back, trapping longs from the reversal and not giving those wanting to be short time to get back in with ease. I'm not saying today could be the same type of day. But have scenario A and B ready to roll.

All in the Timing

You must know your time frame.

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