Monday, January 14, 2008

State of the Market - 1/14/08

After a big down day to end last week, the market put came back in a positive manner today, with all indexes putting in gains over 1%, with the Nasdaq leading the pack at 1.57% increase. Tech stocks put in a good showing on the heels of a good earnings report from IBM. However, the gains were still less than the losses from Friday, and today’s gains were also on lower volume. I did not sense a lot of powerful moves today in stocks, and we have still not had a day of over 300 stocks with 4% or higher breakouts yet this year. The strongest stocks in saw today in my scans were commodity stocks once again – oil and gold. Those are not typically the type of stocks that will lead the market higher in strong rally mode. So overall, I was not impressed – my quote screen seemed like it was broken this morning because there was no action whatsoever. I am still in all three shorts I put on Friday and two of them actually went down today with the market 'rallying", and I am seeing several others get into position where I may put positions on, especially if we rally for a few more days on low volume like today.

With earnings season beginning in earnest now, there is a good chance the market will be very volatile over the next few weeks, with earnings setting the tone overall. No one knows how the market will react to these reports, but with the overall tone of the market, even good reports could be sold-off. Look at the IBM chart. I think it looks like a short here after failing at the 50 day moving average. Both the S&P 500 and the Dow are close to their 9 day moving average, which acted as short-term resistance last week as you can see on the charts. So continue to be alert and I would recommend not buying dips yet – wait until we hit more extreme oversold readings as I mentioned yesterday.

S&P 500

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

I would actually like a few more days like today to get into more shorts. Some are setting up and I am posting them below. The main thing I am looking at on these is their volume – it must be weaker on the bounce up to resistance. It is also important to wait until they get into the right area to reduce the risk involved.


Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

With some big companies reporting in the next few days, I am sure there will be some interesting action. Good luck tomorrow.

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