November 13, 2007

Today was a day that most were hoping would finally arrive. Wal-Mart reported positive earnings that set the tone for the day. From there the traditional tech names, GOOG and AAPL took the lead the rest of the way. As a result we saw one of the market’s most impressive days in recent years. However, let us not think that we are out of the woods quite yet. While today’s action boded well for the general market, it was done on less conviction then one might think as the level of buying was light.

With that said, we need to be cautious and not jump on any short positions quite yet, as there likely will be a positive follow through tomorrow. Whether it can close positive tomorrow will be the market’s true test as to where the market is heading. Nonetheless, this is the kind of bounce that we had been looking for, and should provide us with ample opportunity to open some short positions in the near future.

We cannot stress enough the importance in understanding the dangers that still exist in the market. All of the problems that were weighing heavy on the market before today, that is, credit concerns, housing, rising oil prices, inflation, falling dollar, has not gone away. In fact we are just a couple of news-worthy stories away from getting right back into this mess once again. Therefore, tightening stop-losses and taking profits where they exist is one of the best plays with the type of market we are facing.

Let’s take a look at our charts…


While the NASDAQ did manage to regain its long-term trend line, it nonetheless did so on light volume. The near term resistance levels noted below should provide a good shorting opportunity with some of the different ultrashort ETF”s.

The S&P likewise showed similar action to that of the NASDAQ as it failed close above the 1490 level while regaining the long-term trend line.