Tomorrow’s Plan:

So volume was lower, which fits with a low volume pullback. All the internals were marginally negative at best. All in all, it was a tough day to be active. I think its a good time to explore the feelings that urge you to trade during times like this. If you don’t have an edge, but you place a trade just to place it, then you are literally asking other traders to take your money away. This whole market feels like an Algo’s dream. This market could continue to pull back in this fashion for another dollar in the SPY without running into any tough support. The odd reading of the day was the ISEE at 240, which means massive call buying. I am a bit confused by this, but it goes along with a market that is not making much sense anyways.

My Best Ideas:

•AKAM got absolutely crushed on earnings, and is down almost 10% in the after hours trading. I will be watching AKAM tomorrow and today for any set ups.

•LVS, UAUA, and WFC are all longs in my list with the first two being the best candidates. Although I am not holding my breath for any momentum, I am open to see what these stocks do if they can breach the significant resistance above.

•I like a bid in Macy’s at the 18.60 level. This is just the kind of trade where many supports line up, and in the current environment, the bears will have a tough time pushing through. This is a test trade obviously, so it should be treated accordingly.

•Watching WDC to follow through more on the downside, although volume is falling.

Best of Luck Tomorrow

Today’s Trades:

Today’s Lesson: None

Last Note

This kind of market action is exactly what I was talking about when I mentioned marginal situations yesterday. This is really a great time to be asking yourself why you feel forced to make trades. What will you really miss out on? Another thing to watch for is the “gotcha” move. Basically you are watching the market, and do not know whether to place a trade or not, but the market is moving to where it could be profitable to place a trade. The sell off this afternoon was a great example. The “gotcha” move is the tail end of momentum where you are “convinced” that the move is real, and so jump on board. You can tell this move very easily because when you see it, that part of you that wants to trade either pushes the button to execute into momentum, or you feel regret because the move was “real” and you missed it.

The “gotcha” move can be so infuriating because you finally give in and feel relief that you are actually doing something, only to get your trade slammed back into your face, just like at 3:15 EST today. One of my big realizations was that the market is DESIGNED to put you into these marginal situations. They beckon to you, and seem to be offering just the right amount of edge, only to show you soon after how wrong you were. Why do I feel the need to trade in this situation? What do I perceive I am missing out on? What am I truly missing out on?

Lucas