Wednesday, February 6, 2008

State of the Market - 2/6/08

Another down day today in the markets today as they started with a small gap up, went to negative about 10 minutes into the session, but then ran for the rest of the morning. Around lunchtime, things seemed to stall, and the markets sold off lower the rest of the day, closing near their lows. Volume was a bit lower than yesterday, which the bulls can hang their hat on I guess. However, the Nasdaq broke below some short-term support and looks to at least test its recents lows. Today was pretty typical bear-market action for the most part, with an early rally fading as the day goes on. Considering we had a 3% percent down day yesterday and could not hold even a modest rally this morning, I think it seems very likely we will test those recent lows. I will be paying attention to volume over the next few days as we approach those lows – if volume continues to be average or below-average, then I think those lows could hold. If volume increases on the way down, then watch out.

My shorts held up OK and I wasn’t stopped out early on of any, which to be honest I almost expected to happen because of how little this market has made sense the past two weeks. This is good if we do continue lower – if these stocks don’t bounce up when the market was up over 1% this morning, then perhaps I am in good shorts. I will find out over the next few days. The SKF worked out well today for me as well. Right now I am debating on how quickly to take profits on these positions, because although technically the market looks like it will continue lower, the past few weeks have just been too crazy for me not to acknowledge other possibilities. As long as I am up, I plan on holding tight but moving my stops up a little bit at a time.

Not much else to say or do right now – it’s too late to short right here, and I certainly wouldn’t recommend any longs here – nothing out there worth it, especially right here. Just pay attention on how this market reacts as we get closer to those lows. Good luck out there.

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