Searching for Direction

Navigating this market has been like to try to tap dance through a mine field. Day by day, you either make a wrong step and explode or luckily come to a comfortable resting place. With Tuesdayâ€™s strong rally leading into Wednesdayâ€™s positive open, the bulls felt they had exited the mine field and could resume running at full speed. They were wrong. Wednesday afternoon, the market faded, broke down and put the bull thesis in jeopardy. For today, it appears that the bears are attempting to retake their dominance.

Asia and Europe are weak as the markets digest continued write downs from the financial sector. Futures have been down all morning, but are attempting to rally from their lows. The high momentum names were under pressure earlier, but are attempting to rally as well. As the markets continue searching for direction, we question whether Tuesdayâ€™s monster rally will have served as a bear head fake to get money into the market before punishing the bulls further or whether in marked the low point of the current sell-off.

For today, be very careful. On Friday, November options expire. When options expire, the markets have a funny of way of acting. Short term trends go on hold and prices begin to gravitate toward key strike prices. Therefore, you are better served to ignore short-term technical and focus upon money flow. Our game plan for today is to look for quick, profitable trades without committing capital to any long-term positions. Once we get past the next two days, we can assess where the market stands and revisit our trading policy.

-- Posted by Sean Hannon on November 15, 2007 at 9:00 am --

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