Wednesday, September 10, 2008

State of the Market - 9/10/08

Another volatile day for Wall Street today, as even the pre-market futures were up and down big. LEH announced pre-market and immediately the financials and the futures dropped. I thought about SKF at that point but passed because I had to attend a meeting. I came back to see SKF down four points in a matter of a half hour. That early volatility carried over the regular session, as stocks gapped up, immediately fell, and then rose back to slightly new highs for the session. After about half an hour, sellers came back in and stocks lost nearly all their gains for the session, and it looked like we may have another bearish reversal. Lows were hit around 11:30 though, and stocks immediately shot up once again to their opening highs. Mostly sideways action from there until around 2:00, when stocks broke to new highs. They couldn't do much from there, pulling back and fading into the close, finishing with modest gains, although the Nasdaq outperformed a bit.

Technically, the bounce today does very little to change the technical damage already done to this market, and today's late fade kind of shows how weak things are right now. Until the S&P 500 and Nasdaq can clear their short-term moving averages (1255ish and 2285ish) I see no reason to do anything but manage current shorts and look to possibly add new short positions. In fact, if we do bounce up to these areas, that is where I will likely look to add, maybe even in the tech and commodity areas.

I only made one new trade today and amazingly managed to stay away from SKF for one whole session. My stop in IPHS was hit pretty quickly this morning at $30.67, which gave me a 3.2% loss on the position. CREE acted well and broke down as I expected, so these two kind of canceled each other out. I didn't get a chance to add to CREE however, so it is only a medium-sized positions. I took a short position in CFSG as well this morning at $9.89 on the break of the 50 day moving average. This also looked like it was going to act well, as it fell as low as $9.50, but when it bounced back to the 50 day, my trailing stop was hit at $9.96 for a 1.2%.

Right now, the trading is quite choppy and that makes it difficult to start new positions. Remember though that the trend is definitely down, and the mantra remains the same. Stay away from longs, be patient with shorts in terms of letting gains develop, and be ready to act if more shorts show up. After I go through my scans tonight, I will post any good setups I see. Only a few looked worked out from last night. Good luck.

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