Monday, November 3, 2008

State of the Market - 11/3/08

For the first time in recent memory, we actually had a day that could be considered "quiet", and that is probably a good thing, although we didn't really pullback like I would like to see. The market opened pretty much flat, rallied off that flat open to make marginal gains about 15 minutes into the session, but then chopped back and forth for the rest of the morning and into the early afternoon. Around 2:00, stocks broke to new lows for the day, quickly rallied, but could not climb back above those intraday lows, and sold back off from there. They made a intraday low at 3:05, though, and bounced back up a little bit into the close, finishing pretty much flat. Volume was very low today which seems to paint a picture of a market that is consolidating, which is what I want to see.

The technical picture didn't change much today, but several more days like today - light volume with the market going nowhere - will allow this market to digest the gains it put in last week. It was also allow the leading stocks for this market (not many, but there are some) to rest and allow for possible buy points as their short-term moving averages catch up with their price.

I didn't make any trades today but my short in WIRE was almost stopped out - I let it go a bit longer than normal because it spiked so quickly and with such little volume that I figured it wouldn't hold up. I didn't feel like adding to any positions today or taking any new ones, so I am still just short via SDS and with WIRE. I don't think I will be holding onto either of these more than another day or so, especially if the market acts as it did today.

All in all, I would have to say that today's action was perfect - well, just about perfect. To be honest, I would like to see a little bit bigger pullback rather than sideways action, but either is OK. If we are to have a decent bear-market rally into the year-end, some consolidation here will be very healthy and allow that rally to be stronger than it might if we just move straight up off the lows. Those type of rallies usually die out much quicker and often lead to more testing of the lows. I in no way know if the recent lows are the lows of this bear market - I don't think they will be, but who knows? Regardless, bear markets can produce nice rallies in the midst of the heavy selling, and hopefully we are setting up for one of those types of rallies, much like we saw from March to May earlier in 2008.

With the election tomorrow, it is possible trading stays like this for one more days, and that's what I am looking for - a carbon-copy of today. Hopefully we get it. From there, who knows? I would imagine Wall Street has already figured out Obama will win, so I don't know if there will be that big of a reaction. We'll see. Good luck Tuesday.

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Gio said...

beautiful short on WIRE. I'll join you on next break of support. this looks like a good long term short.

HLF lowered guidance today. this stock is heading to single digits in a few months.


Anonymous said...

Look at those solars go for the past week. Some of them nearly doubled.

I'm hoping the market will be pulling back here a little, making it some sort of an inverse head-and-shoulder.