Friday, January 25, 2008

State of the Market - 1/25/08

By all accounts, Microsoft put out a great earnings report last night, both topping estimates and raising future guidance. If you had any doubt of what type of market we are in, just look at the MSFT chart below to clarify things for you.
MSFT
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

After opening with a strong gap-up right into the resistance areas I mentioned yesterday, the indexes sold off throughout the day. A late bounce attempt around 3:00 failed, and all indexes closed near the lows of the day. Not a good day but in my mind, it was not unexpected and is typical of a bear market. About the only good thing about today was volume was lower today, but it is hard to find solace in that piece of data when looking at the damage done to individual charts. Based on today, I think there is a good chance we test the lows of Wednesday at some point next week.

S&P 500

Nasdaq
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.


Will we break through those lows if we get there? I don't know. Heck, we very well could gap up and rally on Monday. It is very hard to tell from one day to the next what this market is going to do. We have had so much in the way of news and rumors going around that traders seem very nervous and jumpy right now, reacting to every last thing they hear. Just look at next week - we have the State of the Union address, jobs report, GDP number, home sales, Fed meetings, and of course, we are still in the middle of earnings season. All of these events will likely in some way direct trading on the day they occur. Therefore, it will likely continue to be a choppy, volatile environment for the time being that will be virtually impossible to accurately predict. If that is the case, all I can really do is go with the clear, overall market trend, and that is still obviously down.

If you look at the individual charts you should see a ton of stocks that had bearish reversals today and are likely going to be good shorts, providing you had a good entry. I really wanted to short some stocks at the open, but I didn't have the guts - I don't know why. I entered three more shorts later in the day - two that look good and one that looks like I may have to cover soon. That stinks because there were a lot to choose from this morning and afternoon. I will try and post some other possibilities later this weekend. Good luck!

NDAQ

JASO

MTL
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

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