As a trader I am like a WWII decoder. The market talks to us. It just does so in code. And often that code is challenging. But patterns always emerge such that we can understand the market and what she is saying. Yesterday after the announcement that the government would directly infuse cash into the big banks we sold off. And we sold off hard. Today as I write the market is set to open “decidedly lower”. What did we learn from yesterday? What was the market pattern from yesterday? And how will it affect our trading today?

Yesterday there were a few brief ralliess. Each rally our desk wondered if we were about to reverse. Was the market telling us she was about to trade much higher? But each brief rally was quickly met with more selling and we trended lower. We finished very close to the lows in SPY, QQQQ, RIMM, AAPL, JPM, etc. GS and the XLF did show some fight into the close, refusing to finish near their lows. Will the rallies be sold again today?

My sense is that big money was not ready to buy yesterday. If I were running billions I would create a bunch of dream prices for stocks and wait to see if they traded down there. If they did then I would load up. But until there is some more clarity in the market, how do you put big money to work? I am not privy to the dream prices of the guys who run big money but as a trader I can spot when they are loading up. If I see that then I will pounce.

And today as I trade I will decode the market patterns. Will the rallies be sold? As we trade lower will we set up a better spot for a bounce? I develop theories intraday about where we are headed but I wait for the tape to confirm my biases. And I will only place trades where I spot an excellent risk/reward opportunity.

Good luck with your trading!