July 11, 2008

Undoubtedly this was one of the most bizarre market sessions that I have seen in years. Freddie Mae and Mac both were looking at 50% declines to start the trading session, which had the market staring at 2% declines across the board. But throughout the day, Freddie Mac (FRE) was able recover off of its lows and was actually trading in the green by mid-afternoon. While it still managed to finish the day in the red by about 3%, the recovery in Mac was no less than spectacular. In fact if you would have bought this stock at the beginning of the market session you had a double-bagger on your hands by 2pm.

But that is all in the past. What we have to ask ourselves, is whether the markets can put together a string of positive days next week to close the week in the green for the first time in over six weeks. Today’s action, though very encouraging late in the afternoon, didn’t have the muster to keep us in the green into the close.

As always, we let the charts tell us its intentions – not the other way around, and another week in the red, doesn’t alleviate us of the concerns that prevail the markets. We do find encouragement that despite the extremely volatile trading that we saw this week in both directions, the S&P, at the moment, doesn’t seem to want to slip much further below 1240, and especially the lows from June/July of 2006. This is evidenced by the hard rebounds from the lows established in each of the trading sessions this week. It also indicates there is indecision by investors overall in terms of who will have control of the market going forward.

Here’s the NASDAQ and S&P Charts…




A word to the beginning investor and trader

In this type of market you want to play it safe. That doesn’t mean you can’t establish positions to the short side, but you don’t want to commit capital too fast, because the market is well into the bear market, and while it may fall further, you don’t want to become a victim of the “short-squeeze”. Keep your stop-losses tight, and never, I mean never, let your losses run.