Muddled Action | stockbee

1/23/2008

Muddled Action

Market Monitor: Bearish

  • As expected it was a wild action. The panic was averted by significant interest rate cut by Fed. However we still had lot of selling and we had 5th consecutive 300 plus day on downside.
  • Because there was no high volume capitulation, the muddle continues and there is no clear washout of sellers.
  • Bulk of the buying was concentrated in heavily shorted sectors and interest rate sensitive sectors. Any bull move up is not going to be lead by such laggard sectors.
  • Any rally here will offer trapped longs another opportunity to reduce their exposure and will be good for putting in new shorts.
  • We are now officially in bear market in some indices with 20% plus down move, so any rally is shorting opportunity till proven otherwise.
  • The moves will be volatile and capital preservation is number one priority.

3 comments:

Amit said...

Hey Pradeep,

You still getting a clearer picture than most..great work !

Now that its a confirmed bear market, would you be using the earnings strategy, specially in reverse for shorting on earnings with negative surprises?

Thanks
Amit

Pradeep Bonde said...

Stocks top and start going down much before earnings miss, so most of the time the earnings miss based strategy does not work as well as the earnings strategy on long side.

wimpyVO2max said...

On the DJIA, maybe go up and touch the head and shoulders neckline at 12700?