July 22, 2008
This is where the market becomes more and more difficult to interpret. If you read my post yesterday, I was in the camp of the bears heading into the market open. Funny though because in the back of my head I was aware that I was becoming almost too sure of it, which when all was said and done, had me contemplating a weak open followed by a strong finished. Low and behold, that is exactly what we got from Wall Street. Apple failed to scare off the market, and oil dropped even further.
In regards to oil though, you have to suspect that at some point, the longs are going to jump all over oil and try to push it even further. It may ultimately be futile on their behalf, but you just know they are going to try. To a certain extent they will probably be successful, but the big question will be whether any orchrestrated buying effort can be sustained.
We sold our position in Goldman Sachs today after having bought the stock at $156/share. That was indeed a nice return. However we are still short the S&P, and if the market creeps up any further, we may be forced to take an early exit out of the holding. Nonetheless, our original thesis for the market being overbought, and the original belief that the bear market is still in full force has not changed.
A word to the beginning investor…
Don’t be too quick to jump on the bullish bandwagon. While the action and volume over the past week or so has been very encouraging, there has yet to be a retest by the bears of any kind. Wait for that retest and see whether or not the bulls can fend off the effort of the bears and ultimately push the markets higher. If they do this, then you have your perfect “buy-signal”. Patience is key here!
Here’s the NASDAQ and S&P Charts…