And the answer is . . .

no bullish tail for FAS. Earlier today I posted the bullish tail candle forming and wanted to see if it could hold into the close. It did not.

Bulls can hold on to the close off the lows and volume that could lead to a "capitulation" selloff.

I sold half my FAS position for a nice profit at $14.50 (entry at $12.77).

Trades and Thoughts

All of my oversold bounce indicators are now flashing buy signals. However, I do have some concerns and am not taking on any huge positions here. While I have made some trades to the long side to try and capitalize on a bounce, they are all average or small in position size. Why am I not trusting my usually trustworthy indicators?

The reason is the bounce play hasn't passed the "gut check" test. Basically, I have not got to the point where I just feel sick to my stomach about the markets. I haven't sensed any fear yet. In fact, what has caused me fear in my bounce positions is the fact that everybody is expecting a relief bounce.

As I stated earlier today, I made one index play, one ag and one energy play. I also entered TRLG and EWZ yesterday, and both are still above stop levels.

As I stated earlier this week, POT was due for a pullback, and we are now at a good entry position.



SSO (short S$P) is testing lows and is extremely oversold. The fact that we are close to the support/breakdown level provides a low risk entry. I will lose little if I get stopped out, but could make a nice gain.



SWN is still riding above support. This is either a topping formation or a pullback that will continue the trend. If it is a topping formation, I will lose very little.



Off Topic:
I'm a diehard Timberwolves fan and can't believe Kevin Mchale did not screw up the Wolves pick in tonights draft. I am ecstatic that the they picked OJ Mayo. He is going to be a star, and a perfect compliment to Al Jefferson (who at 23 is already better offensively than KG).

For the first time in years, I actually see hope for the Wolves!

Quick Trade Update

I was stopped out of SKF and bought UWM and DDM, which are ultra long the Dow 30 and Russell 2000.

Looks like this might be the capitulation bounce we've been waiting for.



Update: A few readers have asked how I timed the DDM trade so perfectly. I should have posted my entry prices. I did not buy at the bottom. I ain't that good . . .I bought toward the end of the day at an average price of $70.57.

Ain't No Egg on My Face . . .Yet

Many were quick to get on me after the market failed to rocket up after my capitulation call last week. While I conceded that I could be wrong, I also pointed out that it is not invalidated until a breach of 1378 on the S&P 500. Capitulation bounces rarely go straight up. As long as the low of the capitulation day holds, the thesis holds.

So far so good. Volume is showing accumulation (more volume on up days than down days).

Be advised that my capitulation thesis is *short term.* I believe we are in a downtrend with more room for downside. This is not a long or even intermediate reversal call. Rather, it was just a call to play a quick bounce. Nothing more. I still am more willing to short than buy this market, but will make long plays in strong sectors and when I see a bounce coming.

Short Term Capitulation?

I have a feeling we might be in the midst of short term capitulation. Things look really bad, many former leaders are getting abused and it is really tough to buy right now.

Note that does not mean we are going to see the uptrend resume. If we get a post capiutlation bounce, I think it will be of the "dead cat" variety, and we we resume the downtrend later this month. A bounce might be a good place to add shorts.

I have exited most shorts and made two buys.

I took a pilot position in RICK at $24.90. My stop is just under $24, with the recent high at $28. Low risk, decent reward. If the market continues to tank and I get stopped out, no big deal.

My other buy was MON at average price $115.23. This one got dicey when it dropped below $110, but it has recoved and his back up over $117.

I likely won't do anymore buying. I don't like to go all in on up bounces in downtrending markets. I'll make a few small long plays, but that's it. I do still like gold and oil related stocks on the long side.

Trade Notes

Today's bounce may present a good short entry. I just went short VMW (89.10) as it nears resistance (former support), TOL (21.46), and took small positions in ultrashorts QID (40.85) and SDS (55.56).

On the long side, oil stocks are extremely oversold. I took small long positions in NOV (63.74) and OII (62.50).

Note that all of my plays are with small positions sizes. I will not allow for big losses in this environment.

This post is for entertainment and educational purposes only. Do not use for any other purpose. Do not buy or sell based on what's in this post or site. Please read to the bottom of this post.

If You Feel Like Throwing up, Go Against Your Better Judgment

I subscribe to the theory that when things are at their worst, when you have that knot in your stomach that makes you want to throw up, and you feel like there's nothing but gloom ahead, that is the time to do the opposite of what your emotions are telling you to do.

I call this the George Costanza Opposite approach to trading. Pay attention, this is some of the technical stuff I have ever posted here.

George one day realized that every decision he had ever made in his entire life had been wrong. So he decided that when he had a strong instinct to do something, he would do the opposite. No surprise, the decisions that went against his better judgment turned out to be the right moves.

I only had two positions today, so I had little invested in the market. By the time the Dow was down 300 points, I was stopped out of both positions. However, once I saw the red three hundred flashing before my eyes, I got really nervous. I know, it made no sense, since I was 100 percent cash. Yet there I was, pacing back and forth at my desk. I knew I looked like a fool, so I sat down. That's when I felt the butterflies.

Since I had no positions to exit, I told myself I should sell the market. I felt like I was about to miss the big move. Then I remembered something I had read before. When you just can't take it anymore, that is when a bottom is coming. I immediately went into Zen mode and cleared my mind of all preconceptions. I took a look at some charts and noticed how oversold the market was, so I decided to buy.

I bought ZEUS and RIO, even though the steel sector is on my short watchlist. I bought LEH, AAPL, BIDU, CROX and NOV (I'll post the trades tomorrow). Note that these are very short term plays. I still think the expected bounce might not last, and we could see more to the downside.

Since everybody has analyzed the indexes, I'll refrain from posting the SPY chart. Just remember that a positive hammer stick printed right at support on heavy volume. At the least, this is a sign that we will see a short term bounce.

One last point. It seems that everybody thinks a bounce is coming. CNBC, the Fast Money guys, respected bloggers and even crappy bloggers. This worries me. When everybody thinks the market will zig, that's when it is likely to zag. Maybe this will cause the expected bounce to be short lived. Or maybe I'm just too paranoid.