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Tuesday, January 08, 2008

The market is in crazy mode. It's the only way that I can describe it. My hope is that we don't crash tomorrow. The Dow lost 238 points on heavy volume. Advance/declines were about 2 to 1 negative. We are so oversold that I just cannot believe there hasn't been some type of bounce. That is what worries me. However the signal is there for calls so I bought some OEX calls. I had an open order in and it got filled. It has already lost 30% of its value. I'll have to sell it tomorrow probably, one way or the other. Summation index pointing down. We have broken through support. We'll see what happens Wednesday. Gold was up $18 today and the XAU rose 6 points. ABX and NEM were both up on heavy volume. But they came well off their highs. The relative strength of ABX was apparent as NEM sold off much more. I had to dump the NEM calls that I got yesterday to lock in a profit of 40%. There is a good chance that I will buy them back cheaper later this week, perhaps tomorrow. The money continues to flow into gold. However I could not wait around and hold these options forever. Not in a market like this. I'm probably better off with ABX anyway. GE lost 3/4 on average volume. Broken support there as well. Mentally I did not sleep well and feel a bit tired. Markets like the one we are in now offer opportunities. But they are also very challenging. You have to be up for the battle. I really expect a very fast, short covering rally here now. I don't expect it to last but I think it's tradeable. If we don't see that then we are really going to be in trouble. And we are in trouble already. There is nothing wrong with staying on the sidelines during times of duress. Preservation of capital isn't a bad thing. You can always wait for the markets to come back to some type of normalcy. However at the moment the markets are letting us know that these are not normal times. We'll see what tomorrow brings...

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