Sunday, July 29, 2007

Late Friday Break

As the market was getting ready to close the trading week, there were a few who decided not to be long over the weekend. The Dow fell about 150 points in the final half hour of trading. The market ended a poor trading week with an uneasy feeling going into the weekend.

We thought a quick post would be good just to set us up for another trading week. With the drop late Friday there is a question as to just how the market will trade on Monday. After all, the late day break came very unexpectedly to most traders.

We here at the Update think the market is a bit oversold and may have some ability to stabilize for at least a few hours of trading. This market has become extremely dangerous and should be handled with care. Friday’s late action could be a fifth wave for those of you who are Elliott Wave enthusiasts like we are. This implies a minor rally to correct this extreme drop over the past few days. But, bear moves are sharp and corrective up moves in them can be very short lived. Due to the steep nature of this particular down move we suggest selling rallies, not trying to trade them.

The very nature of the market gives rise to most people still being bullish at this point. Oh yes, they may be willing to say that the market was a little ahead of itself and deserves a pullback but they certainly don’t believe this is the resumption of the bear market. That will happen soon enough as prices continue to fall but for right now, we will be happy to sell to those people who think this is a great buying opportunity.

We recommend cash for the near term and maybe we can venture into some longs later in the year when some bargains are out there. We are particularly interested in the possible bargains in the gold complex but that market should be ready to break down here very soon. We continue to watch it for opportunities but it seems that they are off in the distance at this time. We can wait for a good entry point.

Good article on page A1 of the WSJ, "Analysts Debate If Bull Market Has Peaked".

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