Profit Taking Lets the Market Give Back

March 12, 2008

To start the day, it appeared as if we would be able to somehow extend the gains from yesterday. However, as the day progressed, investors and traders alike decided to cash in on their hard earned profits and not put their profits at risk to another possible sell-off. Today’s sell-off doesn’t alarm us at all, as we expected as much following yesterday’s rally. In fact many might have assumed that we would have had a bigger sell-off. Nonetheless, the market still holds a lot of risk at current levels, and the slightest bit of bad news will be enough to send the market down further in this volatile market. So, if you do believe we may have put in a bottom already, don’t commit you capital all at once, instead, do it in increments. At this point you should only be willing to test the waters. Remember those who test the water with both feet, sink to the bottom. Risk mitigation means everything in this market environment. Should the market be able to get itself out of the current funk that it finds itself in, there will be plenty of time to capitalize on the run up. If yesterday’s rally was a mere ‘head-fake’ then we may still be looking at the next leg-down in this market.

Let’s review the charts…

NASDAQ did well today, considering how much it was able to rally yesterday. To be able to hold on to a majority of those gains was quite impressive. However, we are going to need to see some solid action before we aggressively begin to commit any more capital to the upside.

CLICK HERE FOR THE NASDAQ CHART

S&P lead to the downside today, but still has a net gain from the past two days combined. We remain in a downward channel, and bullish investors should hold on to their capital until the market does a better job of convincing us that the worst is behind us.

CLICK HERE FOR THE S&P CHART