Monday, March 3, 2008

State of the Market - 3/3/08

Another late-day rally saved things for the market today, as the indexes closed near their highs of the day but with marginal losses overall. Once again, the Nasdaq and the small caps were the leaders to the downside, while the Dow and S&P finished pretty much close to even. Volume was higher on the Dow and S&P, but lower on the Nasdaq. I can't take too much out of the action today but it was more bullish than bearish. After an awful day Friday and world indexes selling off as well, there were many reasons for the market to continue downward, but it didn't. The weak open could have very easily turned into something more, but it didn't. I don't know what is keeping us in this range and holding the market up, but something is, and we need to respect it.

Technically, all indexes bounced off of some short-term support levels and still hasn't broken out of this range, so I am trying not to be overly bearish here, although that is definitely how I am leaning. If and when we do break lower, then I will be looking to add to the shorts I started Friday. The numbers I am looking at are 1316 on the S&P and 2250 on the Nasdaq. Now I read a lot of bloggers talking as if it is just a given that we will be breaking through those lows soon, and I hope we do. It would make things a lot easier than it is right now without a really clear trend. But it worries me that everyone is just assuming it will happen and happen soon. I am certainly not bullish but I just want to see some confirmation of a new wave down in this bear market before pressing things on the short side. My cynical side is still expecting some sort of bear trap here as a new rumor or buyout or rate cut is conveniently "announced" just as we do break through these lows. My levels of trust in the integrity of this market is very low after the past few weeks so I am willing to give up a bit in terms of entries for a higher chance of success and some confirmation. I would like to avoid being manipulated again if it all possible.
S&P 500
Russell 2000
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

I may be back later with some charts but I get a feeling that it may be a little late for shorts here and besides commodity-areas, do you really want to be going long right now? There is a lot of economic news coming out this week so that may drive trading from here on out. Good luck.

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