fliprent

Its always interesting to watch the analysts and the reporters search for fundamental reasons for a pull back in the markets.  Everything from the Greek bailout, Goldman Sachs charges, failed Terrorist attacks to valuation of the markets.  They do a very impressive job of finding reasons.   This last week of trading has been schizophrenic to say the least.  Take the Dow Jones Industrial Average for the last week.  Last Tuesday it was down 220 points, Wednesday and Thursday combined up 180, back down 163 on Friday, up 146 on Monday, and finally down 220 today.  Sure there is a fundamental answer to this craziness….  and you’lle buy “this watch” (pointing to empty wrist) for a dollar

Whatever the reasons, fundamental or technical, the real trick here is trying to find the right spot to get back in your long trades.   Of course this depends on whether or not this really is a correction and also that you’ve already sold your positions.   In today’s market, if you manage your own investment portfolio or consider yourself a trader, you really need to pay attention to what technical analysts refer to as levels.  Technicians like to use tools such as Fibonacci Retracements, previous support levels, percentages, trend lines, etc to determine when a market will stop selling.  Of course the way this thing is going we could be right back up 180 tomorrow and we’ll be talking about a bull market all over again…

Today’s market looks like a typical “head fake” that you get when the market is stretched a bit.  The markets have been up  24 out of 34 days since the end of the 8 percent correction in early February.   Days like this can make trading painful but if you anticipate them they can be very good. 

 The day started strong as the SPX Index (Standard and Poors 500) jumped 6 points in the first three minutes.  The SPX then retraced and jumped again another 4 points above the previous intraday high to 1180.6.  This looks like a very strong market right?  Not so fast because at 1:30 EST the market (SPX) dropped 10 points to 1170.05 and now sits at 1169 at 3:40 pm.  This is not a market for inexperienced traders.  This is the kind of market that hedge funds and other institutional players use to trap traders.  The market is stretched and with earnings season around the corner there are possible head winds awaiting.  The big boys are never caught with thier pants down but they still need to make their numbers.

If you take a look at the MACD  on a 5 minute chart of the SPY (the ETF that tracks the SPX) you may have seen this coming in time to stop out of any long trades you were holding. If you’re good you might have reversed and shorted the market here as well.  At around 12:10 PM the trigger line crossed below the MACD avg and the histogram also turned down.  The SPY then reversed and turned up to a new high of the day but the trigger line never crossed back over the MACD line and the histogram never crossed above the zero line to green.  This should have kept you out of the long trade (assuming you use the MACD indicator on a 5 minute chart) and possibly kept you in a short trade.  Shortly afterwards the SPY turned right back down and crossed back under the zero line.  Any traders that shorted the market here made a very nice profit.    You can bet some institutional traders had a very good day trading the market while some others..well not so good.

This kind of day will catch even he best traders.  Keep your stops tight or stay on the sidelines until there is some real direction again in the market.  Check out this article for more on the MACD.

I am a tax professional yet I always find myself confused about these phrases, especially when speaking to a client.  In fact it is very common for folks to be confused about the difference between a “tax season” and a “tax year” and don’t even try to figure out the tax return year.  Well allow me to clear it up for those that are still confused, I think… 

Tax Season

The Tax Season is commonly used to describe the time between January 1 and April 15 of each year.  This is the time that we all file our personal taxes for the previous tax year.  Just to add to the confusion, tax seasons also occur within a tax year. 

Tax Year 

The tax year is simply the year in which you earned income and therefore must pay Uncle Sam a portion.  Each year is a different tax year.  At the time of this writing we are in Tax Season 2010 for Tax Year 2009.  Sure this is Tax Year 2010 but we don’t really care until Tax Season 2011 right..??

When in a conversation with your tax professional, she may ask a question about last years tax return.  This often confuses my clients because they don’t know if I’m referring to tax season or tax year.  If you are confused by this question ask your tax professional which they are referring to, year or season.  More than likely she is asking you about your previous years tax return. 

Tax Return

This is when it really gets confusing so I typically stay away from associating a year with the phrase tax return.  So how do we refer to “tax returns” when it comes to the year.  Afterall tax reurns are filed during a tax season but they are accounting for taxes paid during the previous tax year.  Well here it is.  The “tax return” year is the same as the “tax year”.  Next time your tax pro asks you about a previous tax return just replace the word return with the word year and it all makes sense..right?