Will We Get Our Bounce?
June 30, 2008
I am throwing away Friday’s action due to Russell’s rebalance. Although the action on the outside looked appealing it is too hard to tell what kind of influence the rebalance had on the market It seems “too good to be true” scenerio that stocks would bounce soley due to a rebalance in an index. The rebalance had a nasty effect at the end of the day causing stocks to pop and reverse very quickly. We did see indexes finish well off their lows but the quality of support came from an artificial source. Much like what we’ve seen with options expirations and follow through days the rebalance has done the same thing. It has created false demand and clouded many charts. Many market pundits seeing the action on Friday have issued “we will bounce from here” calls. Be very careful, bounces are tough to predict and crude oil is on the move.
Let’s not fool around with Crude Oil, check out the chart here:
Breaking out into new highs as of Monday morning. Crude oil will help drive the pessimism on Wall Street and Main Street. Consumer confidence survery’s are at multi-decade lows. Even though these are extreme, with survey’s and other indicators we know they can always get worse. I wouldn’t try to short anything that is related to Crude Oil. It has just started a parabolic move and could blast off and leave shorts high and dry. I even saw some “Smart Money” trying to short crude around $140. As I have told some traders privately when crude was at $115 DO NOT SHORT OIL! Why try to grab a few points when you could be long and grab MORE PROFITS!
While survey’s are showing fear, mostly related to Crude Oil prices VIX/VXN are not showing fear whatsoever! We will not have a meaningful bottom until these two will show that options traders are FEARFUL. It appears as options traders are looking for bounces with their positions regarding the market. This is exactly why these indexes, volitility indexes sit below 30. We need to see a surge in these indexes, preferably above 40 to see a meaningful bottom. We just aren’t there yet.
Holiday Shortened Week! Please be safe!
Enjoy
Market Speculator
Comments
Got something to say?
