Friday, January 21, 2011

State of the Stock Market - 1/21/11- "Weak As Can Be"

You may ask why my title is "weak as can be" when both the Dow and S&P were up slightly today on Wall Street.   It's pretty simple, actually.   When today's "bounce" is the best you can do with the market oversold and down for two straight sessions, it tells you that we are looking at a very weak market.   This doesn't even take into account the extremely weak session on the Nasdaq, which put highs in at the open and fell hard from there through the rest of the session.   Right now, the bulls are extremely weak and it certainly looks like we are at the beginning of a correction.  Who knows how severe it will be or how long it will last, but you need to protect yourself right now - that's the bottom line.

My main signal turned issued a "sell" signal today, so based on that, it is time to look for shorts.   I will be doing that very thing this weekend, and will likely begin with some ETFs, although many are oversold and I don't like chasing to the downside, so I may wait.   A close above today's high on the Nasdaq would put that "sell" signal into question, but to be honest, that scenario wouldn't surprise me.  A bounce early next week would not be unexpected, but with all the damage that has been done this week, that would likely just be a nice shorting opportunity.

I remain in cash for now.   Hopefully you are as well.   Enjoy the weekend.


CW, Portland said...

my2cents....$'s rotating into safer dow stocks via mutual funds, looking for a safer haven. Techs, mid caps did not do well this week. Leaders did not hold up, in fact GOOG, APPL, sold off pretty well into the close. More weakness coming. Full disclosure. I've been long TZA and QID the last 3 days so, maybe talking my position...LOL

Mac said...

Maybe, but without IBM and one other (can't remember who) the Dow could have been hit bad too this week. good job getting into the inverses early. I expect further downside but we could see a little bounce first.

The Average Jay said...