May 22, 2012

Decided to day trade today because the market is still bouncing around right now. As I posted many times  in the past few weeks, I'm still bearish. Therefore, holding overnight, long or short, is just too much risk. Verifiable by my tweets, I made around 4 trades with AAPL, MA, BIDU, and NFLX; all on the short side. I closed those trades by noon, but in hindsight, it probably would have been smarter to hold them until closing. Coulda, woulda, shoulda.

AAPL

Gapped up this morning, I shorted after the gap and closed the short position when the gap had been filled. To be honest, I did think that AAPL was going to bounce and shoot up after filling the gap. The daily chart is still telling me that AAPL will see the 520's area again, but right now this stock is still a little oversold, and once it bounces around some more, I will look for a shorting opportunity.

Many stocks such as PCLN and CMG also erased gains almost completely throughout the intraday session. 

Market Outlook

Similar to AAPL, SPY, DJIA, the NASDAQ, IWM, etc. all saw a similar pattern: open strong and close red. Keep in mind that this is definitely a bearish signal and it only confirms my suspicions of a dead cat bounce. Notice the low volume and wiped out gains. My own theory is that once investors see the oversold area eases up just slightly, they continue to hammer the market by selling. 

Furthermore, the news from Greece and the eurozone is not helping.

JPM

Wall Street's so-called "golden boy" Jamie Dimon really screwed up. But his company, JP Morgan and Chase bounced quite a bit today. 

Let's investigate further.

There is absolutely no volume on this enormous bounce. Stocks do not move 4.61% in one intraday session with average volume, it's just not sustainable. Notice the chart I posted, most of the bigger candles are accompanied by a spike in volume. But not today, so is this a bottom? Obviously not. This stock is still oversold. Will look to re-short once the oversold area is cleared.

NFLX

I mentioned this stock several times on twitter and my blog. It's going lower. My target still remains in the 61-63 area, but it may see even lower. Still not oversold, waiting for another bounce to add to this short.

Conclusion

This market is completely broken, Greece will not be pumping out good news, and neither will JPM. Once this bounce is over, I'll definitely look to put much cash on the short side. 

You might be asking why I am sitting on 100% cash and only day trading. Here's the answer:

This is the VXX on a 5 minute chart. When the VIX is swinging from a negative 3% loss to a positive 3.5% gain in a single day, then why would anyone want to be holding positions and swing trading? The volatility is too high. VIX is the mother of volatility, and when the mother is volatile, how do you think the child behaves?