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MDabbles' Debut on FINZ.tv's POSSE: Daily Log and Journal for 9/24/09

|Includes: SPDR Dow Jones Industrial Average ETF (DIA)

Reading Assignments:

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Pre-Market:

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This is my first post as a member of the FINZ.TV POSSE Trade Journal, and I’m honored and excited to be posting with such a great group of traders. To give a little background on myself, I have been a do-it-yourself trader since 1987 – my style was always that of a “Position Investor”, buying and holding long term and managing my risk via asset allocation – until the past year.

Fortunately, I was able  to see way beforehand the market collapse during the summer of  last year by simply observing the inverted yield curve signal, and I was almost completely into cash before the crash occurred.

In April this year, I quit my job to become a full time trader, after having “dabbled” in it with some great traders that I had discovered on Twitter. I have lately been experimenting with candles and chart patterns to produce some high probability, low risk trading mechanisms which have paid me very well lately. You may have read my post on the High and Tight Flag. I have almost been trading this exclusively the past month, and I have banked enough profits in one month to equate to over 1/3  of my prior job’s annual pay (so much for the salaried life).

My background is in economics, market research, banking, and even industrial sales, I have dabbled a lot throughout the years. So I have the interests, background, and desire to succeed — and I’ll always be looking for a better way to do things.

Enough of that, let’s look at Wednesday’s action and the outlook for Thursday. The one minute chart of the DOW reflects a strong and convincing sell off commencing immediately after the FOMC minutes were released at 2:30 PM.

Even though the Federal Reserve indicated that inflation is contained and that it will leave rates low for some time to come, apparently that was not enough to keep market traders from taking some profits. I also understand there may have been some concern that Fed indicated it may be withdrawing actively from its economic stimulus initiatives.

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DJI CLOSE

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If you read my post on Tuesday night (see my old Journal ) , you can see that I saw some scarily bearish candles in the Stockcharts.com market candle scans. The candles didn’t lie.

Today’s candles (see the circled bearish engulfing candles below) don’t look any more encouraging to me.

Critical tomorrow is the market’s reaction to the jobless claims that are released before market at 8:30 AM on Thursday.

I admit I feel uneasy, since President Obama has sandbagged the unemployment issue repeatedly all week. This makes me nervous.

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Candles

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A further look at the McClellan Oscillator for the NYSE (and NASDAQ), you can see that we have now taken a turn very close to the center line, which has more often than not indicated that a market downturn is imminent.

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NYSE MCLELLAN

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So the bottom line is that we are at a critical juncture — either we experience further downturn tomorrow which could be a little extended, or we bounce back and strive upwards and onward for that magical DOW 10K. We should have a feel very early in the AM which direction it will be.

Having said all this, I would like to say that if we do experience a pullback, I believe that it will be relatively brief in nature, and that I also believe that we are coming up on  a very strong 4th quarter of stock market performance.

I’ve been mostly selling into strength for the past week, and have been keeping my trades short.  A pullback will give me some good setups.

I’ll try to have some trading charts up later tonight or early in the morning.