DJIM #9 2008
Sunday, March 2, 2008 at 09:28PM One thing is for sure, you have to have a real passion for trading just to sit through this market, let alone trading it. Currently, we are facing one of the most challenging market environment in recent years. Last week, an Ambac led rally turned really sour toward the end of the week. By the end of the week, all eyes are focusing on the economy, the inflation, and potentially more billions of writedown from the financial sector. The potent line up of bad stuff the market was able to fend off Thursday caught up to it on Friday.
Fundamentally, everything seems to be pointing downward for this market. We have an inflation driven rally in oil, gold, and base metal. Raw material prices are creeping higher and it looks as though the inflation is spreading globally these days. The economic reports from the most recent week is not helping this market either and there's further confirmation that our economy is not only slowing down, but it may tip into the "R" mode. Mr. Bernanke also further addressed the status of our economy and played his usual "why we have to cut the rate" approach. Then, there's the U.S. dollar. A lot of the inflationary pressure is tied to the strength, or rather weakness in this case, of the most popular currency, the dollar!
Technically, this market is still within that 800 point range from the middle of January. So far, we made two attempt to break out of 12800 on Dow and 1395 on SPX and both attempt were failed miserably. On the other hand, the attempt to test the January low has been rather none existent as we never even closed below 12100 on Dow and 1320 on SPX. Put it this way, bulls are frustrated and bears are even more frustrated.
For DJIM, we share the same frustration as the rest of the trading community and we'd also like to see some break out movement from this market. As we inch closer to the support, we'd get more cautious on the short side and look for opportunity on the long side. The groups that we are most comfortable buying is essentially the inflation group. Our watchlist has been filled with oil, steel, agri group.
In the coming week, we still have quite a few reports due from some of the small and mid caps and we'll keep our eyes on any potential movers. Also, we have an important job report in the coming week which will shed some more light on this economy.