1-31-2008 Short or Wait?
Can you imagine what would have happened if the fed had only cut the rate by 25 basis points or, heaven forbid, not at all?!?! Yesterday after the announcement, the markets rallied giving me the perfect opportunity to close out my long IYR & EWW positions. Looks like I wasn’t alone in my thinking. For even after the 2nd large rate cut in a week, the markets closed lower.
There were just too many variables conspiring against a continuation of the rally, at least short-term. While the markets showed a very nice volume spike 2 weeks ago, putting in a temporary bottom, the up-volume after that has been less and less each day. This means that lots of people aren’t buying it and that a re-test of the low is coming.
Here is where I’m in a bit of a quandary. While I think that today is going to be at least -150 at one point, I’m not ready to write off that volume spike from a couple weeks ago just yet. With all of the fear & negativity pervading the marketplace right now, I’m a bit of a contrarian at this point, at least in some markets.
So while I do think that the DJIA will test at least 11,850, I’m not sure where it goes from there. And so I have half the mind to hold onto my ammunition and wait for the clarity that will arise in the upcoming day’s trading. Will price merely test the lows & stall/bounce, or will it blow through them on exploding volume indicating the next leg of the bear market?
Had I not been long, I probably would have taken yesterday as an opportunity to get short. In hindsight, I probably still should have gone for a ST swing short play, but I was preoccupied and missed it. But with the drying up volume combined with price & moving average resistance, it’s much more likely that we’ll be seeing 11,000 vs. 13,000 this week.
with a Reader
