Don't Get Lost in the Macro
By Rev Shark
RealMoney.com Contributor
10/26/2010 2:28 PM EDT
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It has been another frustrating day for the bears as the opening gap down was aggressively bought. But the buying has since sputtered out and the market has moved back to even. Now it appears that the selling is picking up.
I have been a bit nervous about the potential for a market pullback, but it continues to hold up extremely well. The bears have not been able to do much despite some growing negatives.
What I try to do in a market environment like this is to stay focused on individual trades and not dwell on why the big picture may be negative. It is very easy for traders to miss good trades because they are too focused on the negatives in the macro picture. There are good trades to be made -- even in markets that are struggling -- but it is very easy to talk yourself out of them if you are constantly worrying about the big picture.
China Shen Zhou Mining & Resources (SHZ - commentary - Trade Now), which I mentioned this morning as a potential rare-earth play, pulled off a picture-perfect reversal. This stock had a big, two-day move when it was first discovered by the hot money. It then pulled back on lighter volume on the third day, and that was a great setup for another surge to the upside on higher volume. I sold this one down but will continue to watch it.
I've been selling down longs pretty steadily since yesterday morning and, if we have a weak finish today, I'm going to reduce inventory further and look at some short plays. The market action still isn't bad, but it does feel fatigued.
At the time of publication, Rev Shark was long SHZ.
