Correcting the Downturn

The stock market, following our preferred path, put in a pretty good low on Wednesday with a good rally after that.  The overnight futures are a fair bit strong this evening, too.  We think that the market will continue its up trend up until Friday morning at which time we don’t think there will be much, if any, reason to be long this market.  But, we will try to be patient until then just to be safe.

We think the current rally that started Wednesday afternoon is correcting the down draft that we have experienced since last week.  Looking specifically at the NASDAQ Comp, we see a high right at 2325 last Friday and a low today of about 2250 to pick fairly round numbers.  That’s a drop of about 75 points, just over 3%.  Today’s late rally took the Comp up to 2275 for a 25 point move, which would be a third or 33.3% of the decline.  Fibonacci retracements would suggest a range of 28 to 46 points for the correction putting the Comp anywhere between 2278, near its high for today, and 2296.  We prefer the move back to 2296 and maybe just a little higher but it should Stay Under the 2325 from last Friday.

If we truly are back to trading a down market we may not get to see that 2296 because of the strong down move that we expect this year.  That move could have started in earnest on Friday giving some fear to the market in the near term.  We can not be certain of this until we see what this corrective up move does.  Thursday should give us a really good indication of the near term move.  We will give our opinion in the next post.

Thanks for the comment, Charles.  I did see that article today and thought it was part of the reason for a short term bounce, what a true contrarian I am.  Those of you who didn’t see the article, Charles included the website in the comment from Wednesday.  And, I don’t really think the “experts” are reading the blog but then I don’t know.

We saw a good article in Wednesday’s CNN reports, too.  We have mentioned Mr. Roach a few times in the past few years and he brings us a good article again.  We encourage you to read the article, paying particular attention to the American side of the story due to the fact that his thought process seems to be close to mine.  He might be reading the blog too but I know he’s probably not.  Here’s the website:

http://money.cnn.com/2006/03/03/news/international/chinasaving_fortune/index.htm

In the mean time, Be careful out there…

Dow Industrials:  11,005.74  +25.05
RYVNX:   19.12 (This is not correct, should probably be 18.91)
RYAIX:  22.27
TLT:  88.58
BEGBX:  12.95  (the dollar has had a good run)