Amateurs Shaken Out

You could almost sense it.  If we went through the old lows, then down we would go.  Well, we did go through those old lows.  And, the selling picked up because amateur technicians around the world all had their stop losses get triggered at those old lows.  I had people tell me they were going to do that.  I told those people and on the radio, we’re in a range.  It’s not perfect.  That means we may break through the lows and shake out the weak hands and then start rallying.  I didn’t expect a 900 point intraday move on the Dow though. But, we had more bad economic data, weak earnings from Intel, more discussion about an automaker bailout and we actually started up, then we fell and fell and fell.  The selling accelerated into the afternoon.  The volume picked up, the stop losses triggered, the capitulation was in place, and up we went. A huge move.  

What’s next?  That’s your real question you want answered.  Well, we need to see what tomorrow brings.  What makes the market difficult is the moves are so big.  You can go from oversold to overbought in just a few hours.  Is it too late? Was that the rally?  Perhaps.  It’s just too early to tell.  The encouraging part was the volume was much heavier during the rally.  In fact, the total volume was the highest since October 10th on the S&P SPDRs.  October 10th was a reversal day and then we went up 900 points the next day.  Today was impressive because it was almost a 90% upside volume day and all of this was just in the 2nd half of the day. From 12:00 p.m. (almost to the second), it was a different market.  Tomorrow has a lot to live up to.  If we see volume anywhere close to today and we have another 90% up day, then we may have something.  Otherwise, this will just be another rally we’ll have to sell into.

For tonight, we need look over the entire portfolio and make a decision on every position.  Are these positions long-term holds or short-term trades (rentals).  Everything should have a strategy attached to it. Especially after a 600 point rally.  

I still believe we’re in a range.  It’s a big range but a range nevertheless.  This means when confidence comes back, we sell to those confident people.  When the are too scared as they were this morning, you buy from those scared people.  

Keep this in mind though.  Don’t assume anything.  Just when you think you have the formula which has been sell all big rallies, that may (may) be the time you should be buying rallies.  It’s too early to tell but let’s keep monitoring it.  Great day though.

Have a good evening.


1 Response to “Amateurs Shaken Out”

  1. 1 Bryan November 14, 2008 at 9:03 am

    thanks for keeping us informed

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