I wish I could report to you that the markets have operated in an orderly manner the last two days, and that clear distinctions and indicators existed to point to an effective trading strategy. But that would not be the case. The chaos that has ruled the markets the last month intensified as the bailout, or is it rescue? bill worked it’s way through Congress. Also, problems were compounded by inflation and job reports that point out the our current economy is in recession, no matter what Washington would have you believe. Additionally, earnings and earnings guidance reports were dismal, at best. So it was a gloomy week on the street. You would have thought that the market would work through this information in an orderly manner and head south in a near straight line. As the charts above show, the markets were anything but orderly, they were a mess…..and weaved up and down in a manner not unlike a drunken sailor.

As for continuity of movement, the market rallied on the Senate passage off the bailout bill, and conversely, dropped like a rock when the House passed the measure on a second vote. In the midst of all this chaos, Warren Buffet methodically carved out equity positions in Morgan Stanley and GE.

My strategy for the week was to stay very conservative and not over trade, setting a limit of only 5 trades per day as my goal. For the most part, this turned out to be a good approach for this market. Time after time, setups would arise and the market would move in exactly the opposite direction one might expect it to move. I widened my stops some to counteract the wild volatility I experienced, and delayed my entries longer than usual to account for the tendency of the market to make unpredictable moves.

I threw the oscillator based entries out of the equation as they fluctuated will nilly and were more a distraction than help. Instead, I focused on volume, support and resistance, and price action and relied on the oscillators as confirmation. There was profit to be made, but it took a bit of restraint to not jump into familiar set ups, which often fluctuated to the losing side.