Monday, November 1, 2010

State of the Stock Market - 11/1/10 - "Broken Record"

Another choppy day today on Wall Street, as stocks moved all over the place but in the end went absolutely nowhere.   Yes, I am aware that I've said the same thing for over a week now, but it's true.   We really are going nowhere right now on the overall market.   Stocks started much higher but sold off rather quickly, finishing near their lows for the session.   At the same time, short-term support still held (although it doesn't look like the 9 day MA will hold on the Russell) and the bears didn't take total control when they had another opportunity to do so.   Where does that leave us?   Who knows?

I am totally in cash right now and although my signals remain ever so slightly bearish, I really don't feel too comfortable doing much right now.   There have been a lot of newsworthy weeks over the past two years that have affected trading, but this week will rank right up there with them.   I still believe there is much more downside risk here than upside potential, but the market will do whatever it wants to do, so again, who knows?   I will continue to look at some inverse ETFs this week, but only when the indicators I follow give me a more convincing signal.  

I really don't have much else to say right now - this is not a week to be making huge moves in the market.   I don't link to other articles that much, but I thought one written by Leigh Drogen this morning was very insightful and is worth sharing....

"The key this week will be to keep your head about you while all others lose theirs.  And in the event that you are wrong, walk away and say good game, next week starts fresh and things will likely be a bit calmer.  I will be raising all of my stops to protect great gains from last week, and won’t be sad to see more positions taken out of my hands by the natural order of profit taking.  This week is going to be about playing the game the right way, as they would say in baseball, good solid fundamental move runners over and play good defense baseball.  This is not the week to swing for the fences with two strikes, we have made a lot of money in the last few months and have a good lead on the market this quarter, there’s no need to take a great deal of risk by letting stops slide and big red P&L days pile up."
I couldn't say it better myself - be careful out there this week.   There will likely be some major swings and it is all dependent on not only what the news is, but also how the market reacts to it.   I think a sell-the-news event is a good possibility, but it's not certain.   Be ready for anything.   Good luck. 

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