The market finally became just too extended, and gave back control to the hungry bears by day’s end.  I pointed out last week that areas of support sit at 740 and 720 for the SPX.  It’s quadruple expiration week, so expect volatility.

Today’s reversal back down was a textbook short.  We’d been running up with higher lows and higher highs.  The last pivot high (A) just missed making a higher high, signalling the first area for a possible short.  When the previous pivot low (B) was taken out, that provided another shorting opportunity.  If you follow the drop, you’ll then see the SPX try and hold the bottom trendline of the wedge (C) .  Once it fails, it drops quickly to the next area of support, usually prior pivots, and the process continues.

We could easily get a test to the upside, so it’s probably some more rangebound trading all week.

I find it funny that news came out a half hour before the closing bell on Friday, which helped the Nasdaq rally back 30 points, and the DJI 200 points, on the day. Did they have to hurry to release it before the bell rang, or was the release timed?  I’ll never know. It seems interesting it happened just as the Nasdaq was beginning a new leg down intraday. You can see the candlestick to a new day’s low on the chart. Then it
closes at it’s high of the 5-min period, and is followed by another bullish candlestick.

Now unless you’re really on top of your game, you’re not going to buy the higher high there. The candle just made a new low. You can definitely tell something is up though, when the next candlesdtick becomes a wide range bar. Bulls have rushed back in.

Psychologically it’s tough to buy after sitting all day in a market that has done nothing but drift lower. This is the time you must though. This is the trading opportunity you’ve waited for all day. I sat there and knew I should pull the trigger. I knew QLD would rally to it’s 200ma. I’ve seen it occur before. I finally did get in after it had already run a point. Moving from a very patient stance to one of aggressive action is a key factor in successful day trading. Master it, and watch your account grow.

I’ve been working on how my psychology is affecting my trading. I’m writing down my thoughts, and the time, to see how they compare with what happens on the chart. The only way to correct mistakes, is by finding the problems, and eliminating them.

Have you ever held a stock for a long time… sell in frustration, and it immediately (and finally) works? Have you sold a stock too soon, and cut your profits short? I do the same. I’ve been trading QLD lately, and looking for a correlation between my thoughts, and intraday mistakes.

I’m opening a new category called, “Stock Market Snapshot”. This will be a bookmark of charts I want to study for future reference, and patterns.

111207 Decline QLD