Wednesday, May 26, 2010

At Crossroads












I spend the last few hours plowing thru my charts and i am left scratching my head as i am sure many others as well!! My conclusion is this: If you are in cash, then you are 100% doing the right thing! This indexes could be at cross roads here. The individual chart patterns in many stocks are very bearish and showing poor form even for a decent bounce and makes me think that we need to short on strength however, some indexes MIGHT be hinting that we might be in a bottoming pattern right now(expect lots of big ups and big downs with severe fake outs). Could take a few days to actually play out and there will be lots of severe whipsaw around this current range. There is only one thing that will kill the bullish case: It's the 200day moving average. Most indexes are trading below their 200 day moving averages. The longer the indexes stay below these 200 MAs, the less compelling the bullish case will be and traders will end up selling into any strength. This needs to be watched and the indexes react as we approach these levels.

Having said, I HIGHLY recommend 100% CASH here as bulls and bears battle it out. This market is more geared for aggressive traders and even aggressive traders should use small positions to navigate thru this.

When i see buying pressure, it kind of soft and on lower volume and when selling kicks, it hits the tape fast and hard and on much stronger volume. If this kind of action continues then it will be very hard to see how the bulls can come out winning.

Conclusion: Right now, the key to be nimble, very nimble. Expect anything really. Have an open mind and be ready to switch your mind in order to adapt to current conditions. It's a jungle out there.

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