Volatility Showing Signs of Diminishing

This market continues to become increasingly erratic. Direction is at the flip of a coin…or so it seems. There is however consolidation occurring near the lows, whether it bounces and breaks this downward trend or is nothing more than a continuation pattern to new lows is difficult to say at this point. However, a breakout or breakdown seems to be on the horizon as the market’s price action continues to contract. Apple (AAPL) and Yahoo (YHOO) both had earnings reports that was well received after hours and should provide the Nasdaq with some buying power heading into the open tomorrow – but we also saw the same type of reaction for Google (GOOG) last week, without any major effect on the market.

My guess i with Apple, is that you have a lot of retail money pouring into that stock that will likely end up only collapsing and going down even further. The run up it had over the past year to +$200 was the envy of every person who failed to get in on the fun. Now that it has dropped back below $100, there are a lot of newbies and amateur traders that are going to buy up the shares of this holding. However, I don’t believe their buying power is enough to sustain the growth of Apple’s stock price in the long term. The same could be said for Google also.

Our bias in this market still remains to the short-side. However, we are paying close attention to the consolidation that the market is now experiencing and where it decides to ultimately go in terms of direction.

Here’s the Nasdaq and S&P charts…