Yesterday we saw a huge rally in the markets, and I will admit I was wrong thinking we would continue to move lower and test the mid-August lows. Like I have said before, bear markets have steep selloffs followed by fierce rallies; you have to pay close attention so you are on the right side of the trade. Capital preservation is key in a bear market, if you don’t know what to do then it’s best to get out and stay cash until you see a clear setup that fits your trading plan.

Since I was wrong this also shows that in order to be a successful trader you must embrace uncertainty and take full responsibility for all of your trades and the risk associated. A successful trader will trade all of his setups and understands that some of them will lose and some of them will win, but if he sticks to his plan and preserves his capital then he will come out on top. You don’t need a magical technical indicator or an expensive setup, all you need is the right mindset and discipline.

Let’s first take a look at the YM. The MACD crossed over which is a bullish signal, one thing I do want to point out is the declining volume as the rally ensues. We also have a spinning top that kissed resistance, which is also bearish. This isn’t enough for me to jump and setup a short, but the market is telling us that the rally may be coming to an end, and a possible short play might be around the corner. If price falls below the low of the spinning top then that would confirm the spinning top and warrant a short setup.

The ES is very similar, but the spinning top is more of a doji which is more bearish. If price breaks through 1480 then the next resistance level is 1500.

Crude has sold off over the last few days and volume has been increasing which is very bearish. The $90 support level has held so far, but if that breaks then a short play would be obvious and I would like the risk/reward associated with that. If the $90 support area can hold then a long would also work, the first target would be just shy of $95 and the second target would be around $100.

I hope everyone has a good Friday and a good weekend. Remember, embrace uncertainty and you will be successful.

First off I want to apologize that I haven’t had a chance to update this blog in quite a while. I will do my best to post more frequently. I hope everyone had a great Thanksgiving and enjoyed all the football.

The YM has clearly been in a abrupt downtrend since the beginning of November, so you should avoid going long unless it’s clearly written in your trading plan. Last Wednesday the YM closed below support and on Fridays light trading price bounced back for a small rally. Evidently no one took Friday’s rally seriously since there was no volume, and Monday’s bearish engulfing pattern tells us the bears are still in control. The next support is the low of the hammer established in mid August. In general I would expect this level to be hit after a few trading days, but considering that a 200+ point swing is common in this market I wouldn’t be surprised to see Tuesday or Wednesday. The Trin did close above 2.00 on the YM, so I would support a long position to sell at the open.

The ES broke through another form of support today; a bearish engulfing candle was formed. One thing I want to point out is the low and the close; both are nearly identical which indicates substantial selling pressure into the close. I stated the Trin closed above 2.00 and that would call for a long position into tomorrows open, but I would immediately cover and look for a potential short play since the bears are clearly in control. Granted if the market internals tell me to go long, then that’s what I will focus on.

The NQ is very interesting here, there is strong support around 2,000 and price continues to make lower highs. I believe this will break soon to the downside and price will fall substantially like it did a few weeks ago. If the breakout occurs to the upside I would be cautious.

That’s it for tonight; I will take a look at the other markets tomorrow night. Good trading.

I asked myself today, why do people still make such a big deal about the Dow falling 360 points? It’s happened several times this year; one would think it’s almost expected on a monthly basis. Anyways, the YM and ES closed on support, no surprise there but the candle is very bearish. The ONLY way I would want to go long tomorrow morning is because of the TRIN, it finished today at 2.13. I won’t lie to you, after a 365pt drop I would expect it to be higher so that doesn’t scream buy for me.

If the ES breaks through support the next leg is around 1500 and the YM roughly 13,400. There is a short squeeze firing off for the YM and I don’t think this move is the end, I think it’s the beginning and we will get a nice wave down before bouncing off support.

The Nasdaq is still my “favorite” index right now since it closed on support and has the strongest chart. But if the ES and YM continue to fall, it will only pull the NQ down with it.

CL continues to impress me, even though it fell today and the candle could be a potential spinning top. I don’t see it that way at all, I think it’s a minor pullback after a huge gain and some people want to take some profit and enjoy themselves. Don’t fight the trend.

Gold is still a great play, and in my opinion should be in everyone’s portfolio in some form. Gold pulled back to the 8 EMA, and I think it could be a good buying potential before it reaches $800.

I would talk about the US Dollar and Euro here, but what is there really to say? Short USD and go long the Euro.

GS (Goldman Sachs) is an amazing company that always finds a way to be on the right side of the trade. All the financial stocks are taking a beating and are in a serious down trend, but not GS – they made more money hedging sub-prime indexes than they lost with their GSAMP mess. What does that tell me? It’s okay to buy GS and short everything else because they will still find a way to make a ton of money. GS fell today with everyone else, but found support at prior resistance. There was less volume today with the sell off which is bullish to me, and the long squeeze continues to fire off.

This weekend I will post a longer blog with several stocks I have been following and other things I’m looking at. So make sure to check back Sunday night.

Tonights blog will be short because I am tired. The Fed lowered rates but a quarter basis point, and the market liked it so there was a rally. I saw a bearish chart, and I was wrong. The YM and ES are still trading in a wedge and both ran into resistance with the rally. Technically I should be bullish because of the bullish engulfing pattern, but I would like to see price break through the resistance before looking for a long setup to occur.

Check out the charts on the YM and ES.

The NQ broke out of resistance with strong volume, so as you can imagine this is my favorite trade for the indexes.

Next up is CL, crude is absolutely awesome right now. We got the pullback I was waiting for and a confirmation that the rally is still intact today, and the best part is the strong volume. If you can’t buy a CL futures contract, look for an ETF and maybe play some options around that. This way you can manage risk and if CL swings a few bucks in one day you won’t get a margin call.

GS broke through resistance today with a strong bullish candle and strong volume. GS is my favorite financials play right now and I will look to get back in tomorrow. LEH looks strong too, but as I have pointed out in the charts I want it to break resistance with strong volume before I enter again. The reason for this is the risk/reward, right now your reward is potentially limited while risk is much higher. If you wait for the breakout then your reward is much higher than the potential risk. You should be more concerned with how much money a trade can lose you rather than how much you can make.

Thanks for checking out the blog, I’ll have something more detailed tomorrow night.