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November 5, 2008

Patience

As expected, the mid-term rally is throwing serious curves to bulls and bears alike. What had begun as a run-of-the-mill consolidation that appeared to be setting up a final panic-buy morphed into a full-blown correction. The S&P 500 sank 5.3% and took out the last four closes. I do not believe the mid-term rally has been derailed, but one has to wonder how deep a groove this pull-back will dig. SPX 925 would be a reasonable first line of defense:

index chart

Then again, maybe the market will just shoot higher tomorrow and give us the blow-off rally mentioned yesterday. For swing traders the best plan at the moment seems to be patience. The SPX has yet to form an intermediate-term trendline off the bottom, and I'm sure patience will be rewarded with cleaner setups. Meanwhile, I am sitting tight on my long positions in the miners and oil. The miners behaved relatively well today... down 1.7% on light volume... though oil gave back much more of yesterday's pop than I would have liked. Nonetheless, I'm letting it ride since I think the dollar will crack again in the next couple of days.

To summarize, if the market continues its decline and approaches the 925-930 area, I will build a long position, as this setup would give me a very tight stop. If we go directly higher, I sit tight until a cleaner setup presents itself.

 

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