Thursday, January 3, 2008

State of the Market - 1/3/2008

The market's final numbers were mixed today, but it was not a good day overall as the indexes tried to put a bounce in midday but failed and only a late bounce prevented them from closing at their lows. Volume was lower, so no distribution days were added today. I noticed a lot of oil and metal stocks moving again today as crude oil continues to float around $100 and news outlet continue to make a huge deal out of it. I don't see any however that interest me in terms of going long - many are a bit extended now and their charts are mostly yellow BOP-wise (a Telechart indicator) instead of green, which is what you like to see. I also see a lot of negative divergences in these stocks as well relating to volume. They may continue to run in the near term, but right now I will not be on for the ride.

The charts of the indexes don't look much different from yesterday, but the Naz and Russell 2000 (shown below) are quickly approaching levels that have acted as support before. They have both been down for five straight days, so a bounce would not be surprising here. If they don't get support at those levels here, things could get ugly.

Nasdaq

Russell 2000
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Tomorrow's trading will likely be driven by the employment number that will be released at 8:30 Friday morning. Although longer term it still looks quite bearish, I don't know how much lower we go here without a one or two day bounce that will likely run in some shorts. Because of this, I actually covered one short for about a 10% gain today, and if we have further weakness tomorrow, I may do the same with others. Besides the momo names that are still very extended, I still see very little in the way of good looking charts for possible longs. I am watching a few (GAIA, OMTR, TUNE, VSEC, ONXX), but I think that if we were getting ready for a significant, meaningful up move, more charts would be setting up. If we do get a bounce, as of now I will using it to possibly add some more shorts. I am still looking at NOV as a possible short and will see how it reacts as it nears some resistance. Good luck!

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

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