December 12, 2007

The markets opened up strongly with major indexes up as much as 2.5% on average. The Dow even was up one point over 270 points, practically erasing all of the previous day’s losses. However, after the day wore on, investors seemed to be more content with taking profits and looking upon the dead cat bounce as an opportunity to limit exposure to the long side.

This morning investors woke up to the news that the Fed would work with other central banks around the world to manage the global credit crisis and alleviate its pressures on the financial sector. But throughout the day enthusiasm waned and at one point major indexes were in the red, but at the end, the bulls managed to gain enough traction to finish in the green. Also in the news was the price for a barrel of crude oil leaping over $4/barrel on inventories being fewer than expected.

Investors now hang their head in bewilderment as to what is suddenly happening in the markets. There is currently very little for investors to hang their hats on, and the current leanings of the markets are to the downside.

Let’s review the charts…

The NASDAQ opened incredibly strong, but throughout the day gave up those gains and finished the day barely positive. This type of action shows that the bears have gained control despite the attempts by the bulls to rally the markets.

The S&P’s action was similar to that of the NASDAQ, in that nearly all of its gains were wiped out. However, it was able to find enough buying power at the end of the day to finish in the positive. The charts have put in three lower-highs which would appear to be the beginning of a bearish trend. Whether this holds up remains to be seen.