Tuesday, February 10, 2009

Market Recap

Tim Geithner's overview (or lack thereof...) of the government's plan to save the financial industry was met with waves of selling in the market today. The S&P 500 ended the day down almost 5%. Today seems somewhat reminiscent of the sell off that we saw in reaction to when the first bank bailout plan was passed by congress months ago. Both instances serve as prime examples of selling the news.

Today's selloff brings the S&P 500 within the brink of breaking below the lower trendline of it's symmetrical triangle. Now, in the short term the market is bit oversold, so I wouldn't be surprised to see at least an intraday bounce some time tomorrow to alleviate some of the oversold pressure. After that, could be game on to the downside.... we shall see. Watch the 800 level on the S&P over the coming days. As mentioned in previous posts, entering OTM bear call spreads or other bearish trades on rallies looks as if it's going to continue to work.

The cliche that states, "if it ain't broke, don't fix it" is applicable in this scenario. In other words, if you have a trading strategy that is working (like selling the rallies), don't second guess yourself, simply do it until it doesn't work anymore. It's often easy to second guess yourself or think that "this time is different", when in reality it isn't!

Now that the retracement has begun, it will be interesting to see whether or not the $NDX and big cap tech stocks, which have been market leaders, establish higher pivot lows or whether they reverse into downtrends. Assuming they reverse into downtrends, I'm going to start to wonder if the market will be able to put in any sort of sustainable upturn.

Tyler -

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