The Good In The Bad
Each evening we focus
on the most interesting aspects for the upcoming trading
day. The comments are based on observations of the nightly
updates of the Stocks/Sectors and Market Bias pages. They
are provided for educational purposes only and are not
intended to be direct trading advice. Also, keep in mind
that these remarks are made up to 12 hours in advance of the
market’s opening. Therefore, overnight events may alter the
outcome of these observations.
On
Wednesday, the Nasdaq gapped down on the open (a) and closed on its low (b).
This puts it at fresh lows for the year.
Look’s like my
team of 6-year old analysts were right (see Tuesday’s commentary).
S&P 500 also put in a solid day lower. This action puts it well below its
recent lows.
Now for the good in
the bad. Wednesday was the second-highest volume day in the history of the
Nasdaq (source CNBC). The VIX rose to its highest level since October (a). And,
the calls I’ve been getting from John Q. Public (a very un-official market
gauge) are no longer “Don’t you think stocks are cheap in here?” but
rather, “Ok, give me the bad news, how much are we down today?”.Â
All of this action suggests panic and “throwing in of the towel.” In
other words, the beginning of the end of the sell-off.
So what do we do? We
could likely see a pop down opening on Thursday followed by a bounce. However,
unless you are a nimble daytrader, I suggest you stand on the sidelines. If you
try to get short in this environment, the market could easily have a sharp
covering rally. If you try to get long, very oversold could become very, very
oversold. Therefore, until we get signals suggesting a tradable bounce
from lows, I’d sit back and watch.
I’ll show a few
stocks of interest as this is a normal part of this piece. Tread lightly should
you decide to test the waters.
Countrywide Credit
(
CCR |
Quote |
Chart |
News |
PowerRating), on the Proprietary
Momentum List, has begun to pull back from highs. This stock may set up
over the next few days.
On the short side, Clorox
(
CLX |
Quote |
Chart |
News |
PowerRating), on the Proprietary
Implosion List, is forming a narrow consolidation at lower levels and looks
poised to resume its meltdown.
Paychex
(
PAYX |
Quote |
Chart |
News |
PowerRating),
on the Pullbacks
Off Lows List, appears to be bumping up against resistance in its rally
from lows. This suggests its downtrend remains intact.
Random Thoughts
That bullish guy was on TV right after the close. Surprise,
surprise, he was still bullish. I think he needs to consult with my team of
analysts :)