A reader emailed "What did you mean by 'Keep those stops tight?"' [in this morning' post "Approaching the Height of the Earnings Reporting Season" -ed]
Good question. A quick look at the DJIA hourly chart for the last ten days reveals a couple interesting points to consider (from BigCharts):
Although we are still looking for S&P 1125 this month (which means next week), this is dangerous territory. To quote myself [favorite source? -ed]:
Markets: Where Do We Go From Here? (INTC; JPM) The Beat Goes On
Regular readers know we are looking for S&P 1125 sometime this month. If you watch this stuff (and I understand normal people who don't) the level of nervousness about the market's direction and this earnings season is as high as I can remember. Participants know they are playing a dangerous game; we all think we will be the one to grab a chair when the music stops.There is downside risk. Any drop could be the start of a 15 to 30% decline.
This is creating a frisson for the players that has to be at least as exciting as Chris Matthews reaction to a Barack Obama speech...
I am comfortable with a 2% loss in futures or options, 4% in leveraged ETF's and 7-8% in individual stocks. Your comfort level will vary but at this point the goal has to be preservation of capital.
The kind of action we've been experiencing will stop you out a lot which can drive you crazy.
[not a long drive -ed]
If you aren't comfortable scale back your exposure to the "I can sleep at night" level.
As I said, good question.