July, so far, hasn't been a good month for me. Out of 9 trading days, I've had four gainers, four losers (all of them big), and one completely flat day (which was today). Net it out, and this month has stunk so far.
Why? Pretty simple: the rally from hell over the past week. Early this month, it genuinely seemed to me that substantial levels had been breached and we'd have another hearty push lower. It was not to be. The market has "floated" higher, on virtually non-existent volume, based more on a lack of bad news (does anyone remember the chaos Europe was supposed to be in?) than a plethora of good news.
The folks over at Elliott Wave put together a chart in their update tonight which neatly shows how utterly annoying this market is being to bulls and bears alike. Sometimes the market trends nicely in one direction (such as in 1995, when it basically went up a little bit every day for the entire freakin' year). Other times – like now – it goes up…….then down……..then up……..then down………making everyone miserable except commissions-charging brokers.
I remain completely short, although I have scaled back so I am only about 95% committed (e.g. I am not using any margin at all; I had "peaked" this month at about 150% committed). I have a huge variety of short positions, and if you looked at all of them, they'd probably fall neatly into about five different categories of rationale as to why I think they're going lower.
One particular category is the "exhausted trendline." These stocks have broken their upward trendlines, but they are spending weeks – or even months – clinging desperately to that trendline, even as the stock ascends higher. Microsoft (MSFT), shown below, is a beautiful example of this. These stocks, in my experience, eventually succumb to the forces of gravity, although waiting for this fall can be exasperating.
There are really no charts of note that I find bullish-looking. Even though I'm getting stopped out of a minority of my positions each day, I will keep "going to bat" with supplemental positions, since I think a break in this market is coming soon. The waiting – as Tom Petty sang – is the hardest part.