Friday, October 30, 2009

State of the Market - 10/30/09

Fun market, huh? A day after putting in a huge rally, the market absolutely tanked today, the second time this week. The market opened only slightly lower but steadily and methodically sold off as the day progressed. They tried to bounce things a bit into the close but really couldn't and stocks finished close to their lows of the day. Volume looks to be a bit lower and that is the only positive out there.

Technically, things continue to look quite bad and the fact that the bulls couldn't get more than one day's bounce following extreme oversold conditions is testament to the fact that things have indeed "changed", at least in my opinion. This pullback is definitely different from all of the ones we've seen since March - much more severe and wicked. As this action continues, it is extremely likely we are at the beginning of a serious pullback. The October lows around 1020 on the S&P will be very important support for this market and could be an area from where we try to bounce again. The Nasdaq is very close to its October lows as well around 2040 and that is a key level to watch. One reason I am not shorting yet is because those lows are so close.

Today was a prime example of why I've been in cash for the last week or so and in reality for much of this year. It continues to be a market where swing trading is very difficult and day-trading seems to be the only way to go. The market is getting very hard to predict day to day and until it settles down a bit, I think cash remains the best play, unless again you are day trading the wild swings intraday.

Since it's Friday, this post is short, but I'll try and put something together in more depth this weekend, although I will say this. There probably isn't much more to say - going short is hard to do with such strong oversold conditions but going long could be suicide as well based on the action today. Not much to do overall. Take care and enjoy the weekend.

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