Monday, February 9, 2009

State of the Market - 2/9/09

We had a snoozer today on Wall Street, as the news items that are holding this market hostage remained unresolved, and until they are resolved, we might continue in a holding pattern like we saw today. I went into the day not planning on trading at all because I knew that if I wasn't by my computer all day, I would be at a distinct disadvantage due to the news-driven trading. I didn't even watch much today, although it did seem very boring from what I saw. Tomorrow is when the new Treasury secretary is supposed to detail the newest attempts to fix this financial crisis(unless he delays it again) and that will most likely drive trade in one way or the other. We also still have the Stimulus/Pork plan still up in the air, and that will also affect trading until it is completely resolved. Therefore, things may not clear up completely tomorrow even with Geithner speaking.

So which direction will the market go from here? My outlook hasn't changed today - we are a little overbought here but I am keeping my options open, basically preparing for going short or long depending on what the market wants to do. I am not getting locked into one outlook - I think that would be a mistake. I will say that if you are bullish, you want to see more days like today - light volume and light selling. If the market was up another 1-2% today in anticipation of what might be said tomorrow, I would definitely be looking to sell the news, whatever that news may be. I think it is very good and very healthy to pause a bit here. As it is, if we rest a little more tomorrow, I am more open to a bullish outlook. We'll see what happens.

If we do get a sell-the-news reaction, then I am planning on just playing the inverse ETFs instead of trying to short individual stocks. The action in individual stocks has just been too difficult for me this year so I'll just stick to SDS, QID, SKF, etc. On the long side, I really have decided to focus on a small group of stocks (GERN, NFLX, and NTCT) from which I hope to get insight as to whether we can move significantly higher from here. These are what I see as leaders right now, and if they act well, then I will become more bullish. If they act poorly, I will take that as a sign to go short.

If you need some possible plays, check out the video from the weekend where I go over charts I am watching on both sides of the market. I would guess that today didn't change much in those setups. I doubt I will be back later because I don't think today's action is going to add any more setups to the list. Take care and good luck Tuesday.

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