Ten Fast Facts On This Market Action in 2014

Many are finding this market environment difficult to trade with the loss of the great trends we have had over the past two years here is what I see.

With $SPY setting on a less than 2% return for the year this signifies 2014 has been a range bound market. This is the year that swing traders and really good day traders have been profitable while most investors and trend traders have not done well and are likely lucky to be flat on the year.
In 2014 buying momentum has not worked over all unless it is for a quick trade. This years game is shorting strength and buying weakness at the right time at the extremes of the range.
Momentum stocks hammered this year with little relief, rallies have been opportunities to sell holdings or take fresh short positions overall.
While small caps and many banks were hammered to under the 200 day sma big caps have held up nicely even continuing to reach all time highs. $SPY has been held up by the energy, consumer staples, and utilities sectors along with its advantage being weighted heavily in big cap stocks.
The RSI oscillator on the daily chart has been a great tool for looking at overbought oversold levels across many sectors this year. 65-70 overbought and 30-35 oversold in stock indexes and sector ETFs. Big cap indexes like $DIA and $SPY have mostly flat lined aroung the 50 RSI and are bouncing off their 50 day sma.
Short term moving averages have been of little help this year for trend identification because there is not one.
While long term the stock market is in an up trend the probabilities of a correction are growing as late bull market sectors are seeing accumulation like in value stocks like $AAPL and dividend payers like utilities.
There is no conviction in this market either way, buyers are not bidding to take positions at higher levels and at the same time they are not selling at lower levels in fear and panic. This is a short term traders market until we see some consolidation into a longer term price range and then a break out of this base for a healthy up trend to continue. A correction would be healthy to shake out weak hands.
The key to not losing money in the market is to know your time frame and trade accordingly. No positions should be taken with out an understanding of the risk/reward and winning probabilities based on back testing. Never trade based on internal signals of fear and greed.
In this market less is more. Trade less and only take the best signals and set ups. Risk less with smaller position sizes so the whip saws that are common will not hurt you. Only trade with a plan, if you have no plan do not trade until you get one, a good one.

Many are finding this market environment difficult to trade with the loss of the great trends we have had over the past two years here is what I see.

With $SPY setting on a less than 2% return for the year this signifies 2014 has been a range bound market. This is the year that swing traders and really good day traders have been profitable while most investors and trend traders have not done well and are likely lucky to be flat on the year.

In 2014 buying momentum has not worked over all unless it is for a quick trade. This years game is shorting strength and buying weakness at the right time at the extremes of the range.

Momentum stocks hammered this year with little relief, rallies have been opportunities to sell holdings or take fresh short positions overall.

While small caps and many banks were hammered to under the 200 day sma big caps have held up nicely even continuing to reach all time highs. $SPY has been held up by the energy, consumer staples, and utilities sectors along with its advantage being weighted heavily in big cap stocks.

Short term moving averages have been of little help this year for trend identification because there is not one.

While long term the stock market is in an up trend the probabilities of a correction are growing as late bull market sectors are seeing accumulation like in value stocks like $AAPL and dividend payers like utilities.

The key to not losing money in the market is to know your time frame and trade accordingly. No positions should be taken with out an understanding of the risk/reward and winning probabilities based on back testing. Never trade based on internal signals of fear and greed.

In this market less is more. Trade less and only take the best signals and set ups. Risk less with smaller position sizes so the whip saws that are common will not hurt you. Only trade with a plan, if you have no plan do not trade until you get one, a good one.

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