Who would've thunk it that by the time we put out DJIM #1 of 2008, we'd be down between 4 and 6% on the major indices for the year . Add the 10% off recent highs for the RUT and we have a mess on our hands. An incredible week of headlines..ISM, FOMC minutes, employment report leading the way to a one sided week as the techs, small caps continued to fall for a 6th straight trading session. Our methodology was always to not hold stocks into their earning reports, now 2008 is shaping up as a year where we might never hold anything at all into an ISM #, and especially payroll number!. Imagine that!. Talk about a daytraders market, a long term investor will see any gains generated quickly on a gap down like we saw Friday in this environment. This will be a difficult market to move around in, the nervousness has really set in and it makes the credit crunch we've traded through look like child's play now. Simply, the hype during the week to the payroll report led to something all feared, but there is no use to moan and groan and analyze here. There`s enough media outlets to harp on the events and possibilities it holds. We have to look to the very short term possibilities this week. This includes a very technical bounce scenario that even has the Bears thinking a recovery of sorts is inevitable now. How long it lasts if it happens is any ones guess. Examples are The NASD comp, if you draw a trendline up touching Feb-Mar, Aug bounce levels, the DOW you can go back to March, Aug and early Dec and do the same, the SPX on its 400ma you can see the bounces Aug and December. The volume late last week suggests the panic has not set in. Selling positions on Friday`s gap down could have been a losing proposition as it was day 5-6 of losses for the indices with technical bounce levels setting in. The desks will finally fill come Monday as everyone gets back to work and many will start to see bargains in front of them. Another possibility that can scare any Bear is the FED giving a surprise rate hike before the scheduled meeting as in 2007. This market needs some intravenous therapy and it won`t be a quick fix unless the FED surprises, otherwise it will be a slow drip of help that could include technical, earning surprises etc. Maybe the techs will get some help from the CES fair hype this week.
As of now, we are not going to change our trading methodology and what we have traded with success while the odds of recession grow. The time might come where we have to look seriously at Golds, Oils, Widgets or consider shorting seriously, but in the meantime there are niches that we are familiar with that still have momentum in`08. This inc. Chemical-Ag sec. There are many things we can rally off and retrace back. We need to see a start of it early this week. Let`s wait and see...