Wednesday, April 2, 2008

State of the Market - 4/2/08

My exact quote from yesterday about the current situation was as follows:

Follow-through tomorrow remains the key for the bulls in my opinion. They can't waste the opportunity that presented itself today.”

From my perspective, today was somewhat disappointing because there was no follow-through from yesterday's big gains. This is quickly becoming a trend (no follow-through after huge one-day rallies) and bulls need to show up in a strong and consistent manner to keep this rally going.

Things started off poorly with the indexes heading lower for the first half hour or so of trading, which after yesterday’s huge gain was to be expected. However, the indexes continued on their recent strength and this brief dip was bought, as the market climbed back into the plus territory throughout the morning. A lunchtime selloff did hold intraday support and rallied back briefly before a fairly severe selloff into the closing hour. A late bounce brought the indexes off their lows, ending with small losses across the board. Interestingly enough, small and mid-caps were up a small amount on the day, and those are the type of stocks I follow. Volume was not very strong, so that takes a bit of sting out of the action, but it wasn't a great day for bulls. A day like today is not the end of the world, and maybe a pullback is expected after yesterday, but I just keep thinking that if we were really at the start of a significant, longer-term rally, we would be able to put two or three big days together in a row. I just don't yet sense a lot of momentum and excitement about buying individual, growth-type stocks. Maybe it will come.

Despite the overall market action, I am fine with the action of the individual stocks I am long. Both MTH and BKE followed through a bit today and look good. I haven’t though too much recently about where and how to take profits on longs because there haven’t been any, but I will do so over the next few days. It really depends on how this rally plays out. Right now, I think it is basically just an intermediate-term rally in the context of a bigger bear market, but one that could continue higher for a few weeks to a few months. Because of that, I will likely remain quicker with profits as I get them instead of letting them run in order to develop big gains. I don't think this is any type of rally that will produce "big" gains. In terms of MTH, I am tempted to sell the news as soon as this plan for a housing bailout gets through Congress. I am assuming this will get done, and I have to imagine that a big reason this sector has rallied off their lows is that insiders have expected that something would be introduced to help all of these homeowners that bit off way more than they could chew and are now wanting help from the government with paying their mortgages.

I did not add any other longs and am trying to remain patient and not force any trades here. I continue to see more set up although some have a little more work to do. I am not focusing on the short side at all right now until I get more evidence that this rally is done. Today's action aside, the signals still point to the bullish side and that's where my focus will remain. I will be a somewhat surprised if this rally stops right here - I think there is a little more upside and some small gains to be made before the bear starts growling again. My thesis remains that we are in the middle of a short-term, playable rally and I plan on trading accordingly.

On another note, today was a new day, but same issues with Scottrade. After not being able to make trades for the first hour of the day on Tuesday, today I couldn’t even log into my account, so I had no way of knowing what was going on with my purchases from yesterday – no ability to set stop losses, no ability to enter new trades. It really sucks. I have looked into other online brokers – namely Interactive Brokers and MB Trading – but am now seriously considering moving my accounts. I am not a day trader so I don’t make a ton of trades, but the lower commissions are still nice to have at these brokers. Anyone have thoughts or advice on online brokers? This is the first major issue I’ve had with Scottrade but along with the commission price, I am thinking twice about doing business with them.

I am playing basketball tonight but I will try to put some charts up after I do my scans. Good luck!

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1 comment:

bhh said...

Two thumbs up for IB. Since switching to them, it has also helped me psychologically as well. Much easier to close out a trade quickly and admit defeat when most round trips cost $2