Weekend Update

Update
This site is a written account of my personal journey in learning the markets. If you gain from it all the better. I did want to say that, upon re-reading this post, it occured to me that it may have been construed as a bit offensive regarding terms such as 'novice' and 'good traders'.... I must have been a bit stressed out when I wrote that and apologize to anyone who was offended... many of the readers of this site have many years of experience in the markets... much more than I do as my background comes from chemistry, not from economics or the markets, though sometimes such a fresh perspective can be helpful. At any rate, have a great week.
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I wanted to clarify the market notes a bit for your benefit and also I cleaned up the last post as I did not have time to proofread it. Take a look again if interested. The important part is this:

As mentioned on the 'bull case' post when the markets were in a trading range we were either going to break 950 on the upside, with 880 a good stop point for bears, or break 800 on the downside and THEN reach new lows on all the major indices. This was according to the market patterns of Elliott Wave as described by Elliott Wave International. The more probable scenario unfolded and we have now seen new lows on the Dow and SP but not yet on the Naz. We are most likely to see the Naz too reach new lows. However, that being said, a major rally in the not too distant future is the highest probability event according to this theory. I cannot expound further as they offer a paid service for this information. What I do want to point to is the Vix, which everyone should check now and again, and daily sentiment indicators, which also requires a paid service but indicates a very low bull/bear ratio right now... and is a contraindicator. The Vix has bounced off of support at 40 and continues to rise. It is a good idea to watch this for a topping pattern and a move back down. This is a possible indicator for a market bottom... not the bottom... but a potential start to the next bear market rally.

Technical indicators such as a flattening of the five and ten day moving averages, a move above the 20 day moving average, as well as oscillators such as RSI, can also gleam very strong light into what may transpire. In this market I have learned that the toolbox needs to effective and efficient... the smart money knows what is going on and if we don't attempt to pay attention to broad indicators we don't have a chance.

I highly recommend that everyone check out alphatrends.net. This is a free blog with videos every day on the market action and is very insightful. The blog is at the bottom of 'blog sites'. I try to combine this with technical indicators and other tools mentioned... there are many more though I am not going to get into that at this time.

Right now I want to say the following concise points:
I am looking heavily to buy strong stocks on market selloffs. I covered my hedge on MOS on the its last major sell off last week and went net long MOS on the day of this post and would have covered the POT hedge as well but didn't want to be too aggressive. I am looking to cover it on the next sell off in this name, should it occur. Because there is still the potential for a big move down in the overall market my plan is to hedge the purchase of strong stocks with a little short exposure to the overall market... Strong stocks in this environment should outperform the overall market... especially after sell offs, going long these stocks and short the market is a hedge that takes advantage of this.

Support lines... it is almost never a bad idea to buy at or near support in a market that is this oversold and sell at resistance... if it goes against you the loss is minimal and the upside is large. When the market was complacent on the long side and the Vix was low buying didn't make much sense except for very short trades... however we are now approaching a fearful market that is much cheaper than it was last summer and ironically has more shorts now than it did when the prices were higher and people should have gone short (remember this post from May... Did you forget about the shorts?). Now perhaps we are getting close to... Did you forget about the longs? ;)? )... Good traders know that it is wise to go counter to popular sentiment... however not to be too aggressive until the momentum starts to shift because the last pop down or up can be a doozy...

Where will this support be? Since we are at lows on the SP and Dow it makes a lot of sense to check out the historical charts on Stockcharts.com for potential areas of support. We should all be aware of this right now. Good traders know their long-term support while novices often don't... again an edge that we need to have or to learn.

I also recommend that you at least become familiar with:
RSI
Bollinger Bands
Parabolic SAR
Stochastics (I like slow stochastics best myself)

There are many other great tools out there and like these are free at stockcharts.com.



Right now this is VERY important... please read... just as a test to share ideas and to take advantage of the online trading community that we are a part of I recently started a subsidiary site called 'Yellow Rose Ninja Trades'. The link can be found just above the Yahoo! search box on the right. The goal is to share ideas on possible trades and set-ups... Now is the time, as I mentioned a few posts ago, to really come up with good buys for when the market potentially takes off to the upside... and this is an opportunity for us all to share such ideas now.......

I will post there for myself for ideas to check out and would love for you ladies and guys (mostly guys... I know... I'm not trying to kid anybody here ;)) to post names or ideas that you really like for everyone to read. Unlike the 'Rose' it is unlikely for there to be much written explanation and in depth analysis... this is really just about quick ideas... it is still experimental at this time and I am not sure where it will go but lets check it out and see. Please take a look after reading this post.

On another note I will be very busy again and probably will not be able to post much on here for the next couple of weeks. I may but only if something is really worth noting. I will check 'Ninja Trades' a bit more for quick ideas... again I am interested to see where that goes... but I will be out of town next weekend and have a lot of preparation to do for that this week so that constrains my schedule... just a heads up and have a great week...



"The Yellow Rose Street Beat" is for informational purposes only. It does not give investment advice.