June 3, 2008

While it looked as if it would be a rather quiet day, when 1:30 rolled around, the computer sell programs kicked in and sent the markets down in a heartbeat. Though the markets managed to close off of their lows, and even saw some buying interest in the later parts of the afternoon, we are nonetheless, becoming very cautious in the current market, and we continue to tighten our stop-losses on our current positions. Interestingly enough, the mortgage crisis once again is rearing its ugly head, with rumors that Lehman could be the next Bear Stearns. Unless this week turns itself around quickly, we could be looking at renewed selling interest in a trending fashion. Both the S&P and Dow are already creating new lower-lows and lower highs.

Our approach to the current market environment is to tighten the stop-losses and even begin taking profits in those stocks that are range-bound or have shown signs of slowing over the past few weeks. The S&P has a head and shoulders pattern that is about to be confirmed, and the last thing you want to have happen is see your profitable positions turn into losses.

It is also worth noting that oil is just about ready to give us a sell signal, as speculators seem to be running for the exits.

Here’s the NASDAQ and S&P Charts…