This Stock Rally Will Be Erased By The Middle Of Next Week

For those of you who don’t know, the $SPX (S&P 500) (^GSPC) was up 6.37%, the $DJI (Dow Jones) (^DJI) 5.80%, and the $COMPX (NASDAQ) (^IXIC) 7.07%.  The tech rally was the most notable Tuesday, as proven by the ridiculous NASDAQ surge.  My weekly watch list was quite gorgeous, with the average percentage gain of 5.26% and an average dollar gain (not factoring in the FAZ loss) of $1.86.  Most notable losers in the watch list are as follows:

• Direxion Financial Bear 3X Shares ETF (FAZ):  -$37.67, -37.9%
• Newmont Mining (NEM):  -$2.76, -7.3%

Most notable gainers in the watch list are as follows:

• Direxion Financial Bull 3X Shares ETF (FAS):  +$1.03, +38.1%
• Nucor (NUE):  +$4.99, +15.8%
• Goldman Sachs (GS):  +$11.33, +15.3%

I ended up in front of my computer around 1, and saw what was going down.  I initially thought to myself, wow, this is incredible, and then I began to investigate what caused it.  Through my research, it seemed as though Barney Frank actually did something good for the American public and the United States Stock Market, as he and his cronies on Capital Hill are in discussion about, “Heavily revising the Mark-to-Market accounting system and possibly reinstating the Up-Tick Rule back into our markets.”  Yet another man of power spoke up today, as Vikram Pandit of Citi (C) told everyone that this quarter is the best he’s seen for Citi since 2007.

Although I’ve heard rumors after hours of a “bottom sinking in,” I must tell you that this pop we had on Tuesday will be erased by the middle of NEXT week (not this week).  I have no thoughts that the bears are going away, and to tell you the truth, I feel that Tuesday was a “buy the news” day.

Another theory I have about Tuesday was the thought of traders being sick of oversold levels.  We got to a point where oversold didn’t matter, and that was when FAZ broke through its $85 resistance level on March 4 and kept going, not stopping until $115 was met.  Traders have finally snapped out of it, and they’ve realized if they keep selling, the market will tank to unheard, unseen, and unbelievable levels.

So now we’re stuck.  We’re going to rally some more, but when will we stop?  Only time will tell.  Allow me to grace you with bullet points of my mistakes:

• I didn’t have market buy orders in for Apple (AAPL) and GS off the open because I wasn’t sure how the market would play out today (and I knew I would be away for most of the day, leaving me exposed without stop points if the market turned on me).  Sadly, I have no idea that Capital Hill would rain godly words down upon the market to make it spring board an average of
• Selling out of Ultra Basic Materials ProShares ETF (UYM) @ $9.25.  I took a gain, but it’s not smart.  This is the largest gain in the $SPX since November, so why I didn’t hang on I have no idea.  This is a classic case of, “Beginner’s Trigger-Finger Syndrome,” or BTFS for short.
• I bought FAZ @ $69.43, only to receive a bitched-up loss of -$3.46, stopping out at $65.97.  This was a mistake on my part, for the VIX (^VIX) wasn’t too good of an indicator Tuesday and even at my sell-point, the sucker reversed for a massive up-tick.  The $TRIN didn’t work either, as it increased from 11:45am on.  I even pulled out my $UVOL/$DVOL relationship at my time of trading, but didn’t time those right.  This trade was a failure no doubt a 15 yard, failure to advance penalty on the offense, as the Quarterback (myself) screwed up big time.
• Gold ETF (GLD) and United States Oil ETF (USO) have gone dead weight, and therefore I have a market order sell for GLD on Wednesday and a USO stop @ $27.60, taking on a +$0.21 gain if I get stopped out.  Should have sold off the open Monday.

All in all, the beginning of this week has definitely shanked me.  I have learned the bear market too well, all because I began trading in a bear market.  Each time I’ve screwed up in the past, it’s because I’ve been bullish, and I’ve made some good trading rules that I’ve followed when  I want to go bullish.  It’s now time for me to make rules for the bearish game, as I clearly don’t have any risk management for my bearishness.  My mistakes will be added on to my “It’s February” post rules, which will be edited and re-posted tomorrow night.
Until then, keep your longs that you had tomorrow until you see volume weakness.  Watch the $SPX closely, for it’s nearing a resistance level, as seen in the chart below:

$SPX  30 Day, 60 Minute

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