Where Do We Go From Here?
The
market took another hit, but it did so on lighter volume which has
been standard over the past couple of weeks.
The market has been acting
fairly well in terms of price and volume. We
have been seeing it decline on lighter volume than the previous day and rally
on heavier trade. The only problem lies
within the fact that it has yet to produce a follow-through day.
The closest thing we saw was a 1.6% gain on heavier volume than the
previous day on 2/27 in the Nasdaq. Unfortunately,
this does not qualify and the recent declines have proven that this day was not
further proof of accumulation.
Another piece of evidence
that points to a struggling market can be found in today’s trading from Pharmaceutical
Product Development
(
PPDI |
Quote |
Chart |
News |
PowerRating). The
stock tried to break out of a base through resistance of 30.70 on 2/28.
Volume even backed the move. The
main point here is that it is best to get all
of the odds in your corner before taking the plunge.
In this case, the market is obviously weighing in on the move, as the
stock got nailed today.
Long positions are risky
propositions at this time. I like cash
the best during this uncertain time because short positions have proven to be
tricky as well. If you were short the
SPYs for the entire month of February, it would only have yielded a gain of
1.3%. This does not seem worth the risk
to me and would at best call for only a small position in relation to one’s
portfolio.
Where do we go from here?
What should we consider with the upcoming war with Iraq? My answer is a resounding:
Watch the market. Whichever
direction the market makes its move; we will see overwhelming evidence through
price and volume. Right now we seem to
be in the middle of nowhere. After
three years of declines, the market has now moved along to wearing out
investors with low volatility. The VIX
has not been able to break above 40 since Mid-August of 2002.
The Put/Call has finally managed to start moving up again and closed
today at .89.
When it’s least expected, we will see many of these indicators and the
market’s price and volume moving in a Bullish direction.
Until that happens, cash is the best place to be.