Monday, March 30, 2009

State of the Market - 3/30/09

A pretty nasty day today on Wall Street, as news of a potential bankruptcy for the big three automakers caused a gap down at the open, and that gap just led the way to more selling. The markets were rather calm overall as the selling just slowly took place throughout the day and there were not many attempts at bounces. They did bounce a bit into the close, but still finished with major losses. Volume was mixed - higher on the S&P but lower on the Nasdaq.

I didn't do anything today as I don't like chasing gaps either direction in this market, but on the surface, today certainly looks meaningful. Trendlines were broken in a severe and powerful manner and it is certainly possible we see more downside over the next few days. I don't plan on shorting here however - I just have a hunch that something might happen from the government side soon that might cause a quick short-killing spike. I have read bits today about mark-to-market possibly being changed on Wednesday and Thursday, and if that happens, I would not want to be short. I don't think it will be a game-changer, but rather that something that may stop me out of any shorts I would have had. As I work my way back into the swing of things, I would rather not take chances until I am comfortable with my read on things.

From here, what I would really like to see is a little relief bounce over the next few days that would setup a bear flag. I would love to see the S&P consolidate a bit here around its 50 day moving average before falling further. That's when I would like to get short. It is possible this is just part of a pullback on the big move we had throughout March, but I still have my doubts. This bear market bounce started without fear, without a spiking VIX, and without a capitulation event. I still think we need to have one at some point for this historically bad bear market to end for good. So I would lean more to us setting up a top here on this bounce that will lead to new lows eventually and hopefully the final move lower for this bear sometime later this year.

That's about it - got a dishwasher to install and some electrical work to do, so back to work. Take care and good luck out there.

1 comment:

Anonymous said...

welcome back mac! Question...why are you so insistence that this bear market has to end in a capitulation manner ? I read the 2000-2002 bear market actually ended in a whimper.