Wednesday, March 5, 2008

State of the Market - 3/5/08

Another up day for the markets today, although it was a very volatile session. Following-through on yesterday's rumor-based reversal, the indexes started strong and was up nicely up until lunchtime, caused in some part by more rumors of the impending bailout of Ambac. The company actually had its trading halted for a time around lunch. When the rumors finally ended and the actual news came out about the bailout, the market did not seem to like it, because a quick sell-off ensued that took the indexes back to losses for the day. The sell-off lasted until around 2:00, when things picked back up and the markets closed with marginal gains for the day. All of this action came on lower volume, so I can not take much at all out of today's action.

Technically, the indexes are still below their short-term moving averages (the 9 and 20 day) and until they get over both of these, my bias will continue to be bearish. We closed pretty much in the middle of today's trading range, and if yesterday was truly a strong reversal day rather than a manipulated bounce to hold some key support levels, then I would have expected a stronger day today.
S&P 500
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Perhaps after I do my scans tonight I will have a better idea where we are headed, but right now I am still confused. Perhaps we will get some clarity by Friday when the big jobs number comes out. However, we are continuing to see negative economic information come out pretty much each day - today's Beige Book report reported more slowing and oil hit more records today - but we don't go down. So even with an awful number Friday, I have no feeling one way or the other how the market will react. We are basically still in this trading range after yesterday's close, and I'm not sure what it will take to get us out of it. Right now, I am still short, but I don't want to do much of anything else except wait for some confirmation of what is to come. If we get it, I will then look to add to these short positions. If you are not in positions right now, I would advise you to stay that way. Keep looking and be ready to act if we do finally move one way or the other here, but starting positions now, whether long or short, is pretty risky in my opinion.

The main thing I was thinking about today is what CNBC is going to do now that the whole Ambac thing seems to have played itself out. I mean, I really feel bad for them. I hope some other important "news" (wink, wink) will come out soon can allow them to continue their role as market savior. They have done such a great job the past two weeks that I would hate to see them lose this role, or, for trading to actually be legitimate for a few days, God forbid. Nobody wants that to happen, do they?

If I find anything tonight that looks interesting, I will post some charts later. Best thing to do right now is be patient and just wait this thing out. I am sure that we will break out at some point here one way or the other, at least I hope so. Good luck.

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