The last couple of weeks have been hard. Everything I look at has been trending sideways while the Dow has fallen to the same levels as late April (down 7.42% from the highs in early June).
Take a look at a chart of the Dow:
Click to Enlarge
You can see that what used to be resistance has now turned into support. The main question I am asking is “will the market close below 8075?” I think we could see a pretty serious fall if it does break that level. The economy shows no signs of recovery and inflation is a ticking time bomb so I have no reason to believe that the market will see anything worth rallying about.
$PALM Trade Analysis
The challenge I now face is finding decent trades without losing my mind in a stagnant market. As I detailed a while ago, a short on $PALM was my most recent trade. From my rookie VSA (Volume Spread Analysis) read, I saw major selling at the top and was correct. The unfortunate event, was that the selling was not enough to knock $PALM off its trend and I found myself being forced out of the trade down rather than booking the profits.
Here is a chart of $PALM:
Click to Enlarge
Overall, I am seeing a lot of selling at the tops in $PALM and little buying to support the rally higher. This would lead me to believe that it is only a matter of time before $PALM takes a spill and the thing I am looking for is a close below the 20MA and then the 50MA.
Look for high volume and a possible gap down because these moving averages have been very strong support for $PALM and the smart money will likely take out a bunch of stops if they gap it far enough down. This would cause quite a bit of selling, further fueling the decline.
Overall
Trading in a sideways market can be disastrous to an amateur investor because it will eat your account through commissions and lack of significant movement in most trades. My advice is to sit tight and wait for the market to give us an indication of future direction through a high volume series of moves. My money is on a move lower but we have to wait for the market to decide.
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