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Correction Deepens As Sellers Step Up Knocking Over Bulls
By BigWave_Trader on January 28, 2010
The market received another jolt of selling as traders dumped stock. President Obama’s State of the Union address failed to inspire Wall Street to push stock prices higher. Even with the Federal Reserve holding steady with its game plan Wall Street simply wasn’t impressed with Obama’s vision for this year. Volume was mixed as the NASDAQ volume soared and NYSE volume pulled back. Price action remains weak and today’s action hints this market continues to want to see lower prices.
Yesterday’s commentary I mentioned we were seeing long setups and it was a positive. However, we know that the market needs to cooperate as 3 out of 4 stocks will follow the market’s direction. It is very important to put odds in your favor when you are trading. The greatest traders of all time knew this important fact. At the moment, the market’s path of least resistance is lower and it is unwise to think you can find the one stock that moves against the market.
Corrections are important to a market because it will allow strong stocks setup properly. Like I’ve mentioned before we are seeing these stocks forming bases now, but we need this market to cooperate. For now, these stocks will have stronger Relative Strength lines and perhaps form bases that have shown to produce big gains.
As we see it there is only two options; get to cash or cash. Many traders are unseasoned to short stocks. If you didn’t make money in 2009 shorting is a definite no-no. If you didn’t make money shorting in 2008 shorting is a no-no. How do you expect to short here and make money when you couldn’t make money short in most ideal time to short in 2008? With that said, if we see a low volume bounce in the market it may very well set up some shorting opportunities.
Keep it simple for now and do not overextend yourself. When the market is correction mode it offers up a great time to take a vacation from the market. The market at some point will offer up a follow-through day for us to get long and strong. Until then, we’ll search for shorting opportunities and wait patiently for the market to resume its uptrend.
Enjoy the weekend.
Posted in Commentary