Market Perspective: The Long and Short of It

Excellent market recap over at TraderMikes which paints the technical story of where we’re at right now, and  I agree with all of the analysis.

I was short one minor position, Altera (ALTR) throughout the day, covered and went long on a couple of ETF’s near the close when it seemed like we weren’t going to dive into a black abyss. I think the exaggerated sell-off occurred right at the exact point of the lower trend-line and it pushed a bit lower to scare some people out their positions flooding the market with sell orders to be down nearly 700 points. It was hard to pull the trigger and I stalled a little costing me 100 points but I think we’re going to bounce tomorrow as it’s the unlikely result after a brutal day on the markets.

In addition to paying attention to the symmetrical triangles on the indexes I’m also watching the ultra short ETF’s and the triangles they’re forming.

60min chart (click to enlarge)

All of them (DXD), (SDS) and (TWM) basically have the same pattern which is bullish in nature, however when you look at the daily they’re loosing momentum on the RSI , MACD, and Full Stochastics, leading me to believe that they will fall, which in turn would mean the overall market is going to move higher by their relationship. I may be early in opening any long positions, but I have the luxury of taking some risks as I’ve been in cash or short during this entire downturn.

Going long on big down days and short on massive up moves has been pretty profitable of late and we dropped 900 points in 2 days, so I feel a small bounce (200-350 points) may be in order.

I’ve also gathered a small watchlist of stocks to short and given the severity of their oversold state I would think a move up would help work off some of their oversold state.