Monday, August 25, 2008

State of the Market - 8/25/08

Not a good day today for stocks, as the market gapped lower to start the week with the financials leading the way down. The first hour or so of trading was pretty much sideways, but around 10:30, things broke open and stocks move lower, with the Nasdaq leading the way. Another hour of sideways action followed until lunchtime, when things got really bad really quickly. The market fell very sharply, and for the rest of the afternoon couldn’t manage much of a bounce, basically going sideways again all the way into the close. Stocks finished with large losses, but volume continues to be very low, even compared with Thursday and Friday’s totals.

Technically, this was not a good day for the bulls, even if volume was still light. The 50 day moving average did not hold for either the S&P or Dow, and the Nasdaq broke back below both of its short-term moving averages. The key levels I am watching right now are 2360 on the Nasdaq, 1260 on the S&P 500, and 11,290 on the Dow. I mentioned this weekend that I expected a little more sideways chop this week before we headed lower, but if those numbers are broken tomorrow or Wednesday, then I would be looking to get more short more quickly than I expected.

The only thing I did today was take a short in MON at $116.81 midday. This touched its 50 day moving average in the morning and reversed from there. It may bounce from here, but I figured that with a stop above the 50 day, it would be a low risk short with possibly a good reward. I am back at work now and for some reason can’t get Telechart installed back on my computer, so to be honest, I was a little lost without it today in terms of looking for other shorts intraday. Hopefully, I can get that taken care of without a problem.

As I said this weekend, we are now in a position to watch and try and time this breakdown. I do think it will happen – perhaps today will be the start – and I want to be short when it does. With the low volume, anything is possible tomorrow – we could be up 200 points – but as September approaches and the big boys come back to play, I still think this market is in for some pain. Be careful out there, stay away from longs right now, and be on the lookout for nice, low-risk entries in shorts. I’ll be back later with some charts.


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