The stock market is drawing blood. First it was the bear's blood and now it's the bull's blood. Heavy casualties out there. They don't make markets like they used to. The parabolic rally up to SPX 3580 yesterday and then the big time dump today is uncommon. In fact, I have never seen it before. Usually you get a small range consolidation day or two after an all-time high. Those days are gone. These markets don't take their time changing trends. Its straight up and then straight down. Tough markets.
Those trading off of historical patterns are going to be caught off guard by this market, because it doesn't trade anything like what I've seen before. The trading patterns are not something that would result from humans trading, but from algos running wild and having their way, moving prices as far as possible, to the breaking point, to run as many stops as possible. Its clear that human based trading volume is too small to counter the algo-based forces at work.
Mean reversion trading has gotten decimated in the past 60 days, and its been a bloodbath. The pain is real, I will not sugarcoat it. But there's no crying in baseball, these are the markets that we will have to adjust to in the future. Its not going away. One thing is clear: daytrading using mean reversion strategies will get you killed in these type of markets. Talk about picking up dimes in front of a bulldozer. And there are a lot of bulldozers running around in these markets. You had a bulldozer from Tuesday to Wednesday close on the upside, and then a bigger bulldozer from Wednesday close to now on the downside. Those humans trying to pick up dimes in between are getting run over.
I have basically just given up on daytrading the SPX, the past patterns don't work well enough and its more suited for trend trading now, unlike before. Swing trading still works, but you've got to take smaller positions and allow for bigger moves to go against you because these algos will take things to the limit to test the counter trend traders. To test the humans taking the other side of their trades.
Still deep in the red on the Nasdaq shorts, and looking for a somewhat graceful exit if the SPX gets close to 3400. There is an air pocket from the alltime highs at 3580 to 3400, as there was very little time spent on that move up. That will have to change, as we fill in the air left behind.
It is a war zone. I'll have to regather the troops, take some losses around 3400-3420 zone, in order to put out the shorts again on a bounce, to make some points in the coming chop. I expect a choppy range to be formed over the coming weeks. Chop is more favorable for my style so I'm going to have to make up for past losses. Anyway, looking for one more push lower from current levels of 3460 down towards 3400-3420.
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Well done MO. It's like you said the moves are so extreme that even putting on a small position can be painful.
About as good of an exit of really badly timed shorts as I can think of. Now time to do more short term trading, looking to buy SPX 3350 and sell 3500 for the time being. Not interested in NQ anymore.
NQ is nuts anyways. Do you think this move is over for now given the hefty amount of points we have retraced? The move looks similar to the one we had in June.
I don't think we're going to go back to 3550+ anytime soon. I do think we'll spend a lot of time trading between 3350 and 3500 for the next 2 weeks. Thinking it will be choppy, don't expect any big trends for the rest of the month. After the next 2 weeks, probably another downleg towards 3200-3250, around the June highs for a bottom, and then back to another long up trend.
I realized that NQ will be much more tradeable after the bubble bursts. Don't expect that to happen till middle of next year. Until then, just too dangerous to short. Not worth the headaches.
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