Now that we have broken down out of the consolidation zone in each of the major indexes, it is highly likely that we have a significant downward move ahead. Given recent volatility, we could see a headfake rally virtually anywhere. However, we have broken through lows that were tested on multiple occasions, and are in a clear downtrend, both long- and near-term. We have lower to go in the immediate future.
In this volatile market, I am having more success trading options than equities. This is a personal style thing, and relates to my relatively tight stops on equity trades. I tend to accumulate a much larger number of small options positions gradually over time. Because they are small, I do not get anxious when they go they wander in the wrong direction, whereas I get very anxious when my equity trades do not work immediately. So mainly this is my own personal emotional issue, and I work to design my trading routine to minimize the emotional component. In this past week, how many times have we seen 5%+ moves in major indexes? It is tough to keep emotions in check when such volatility is the norm.
Looking at SPY, the market is no longer range-bound, and has apparently chosen a direction. I have seen a lot of technical patterns fail recently, so I am still being very selective with trades, and keeping cash positions high overnight.
I also want to show SLX, the steel ETF, to demonstrate how bad things look in the global economy. It is also worth looking at charts for the shippers. The situation is dire.
Right now I am mainly looking to enter some more put positions where I think we will be reliably lower within the next couple of months.
- MA: There is growing realization that credit cards are going represent one of the next big crises, as banks face large losses due to personal defaults.
