What a ride on the first 3 days of the new year. We are now officially on recession watch. Major Economic reports will be key in determining the direction of the markets for the near future. A bad ISM manufacturing report on Wednesday, followed by today's jobs report has now left us in a general 10% downturn, and left us in an oversold condition. We may see an attempt to rebound on Monday, due to this oversold condition as well as the absence of any major economic news. There was a large spike in selling pressure in the last 10 minutes of trading as well. Therefore I opened small long positions in FLSR $245.36 and AAPL $180 at end of day today and will close them on Monday.
Near term, I expect the markets to test August lows after some consolidation here. The intraday low on August 16th, 2007 was 12,455. We are entering earnings season again, and I expect most companies to report decent earnings but give poorer than expected guidance. I would not be surprised to see a Fed action (in the form of an emergency rate cut), should the market be testing these levels, or on another series of major downturns/ bad economic reports. So far, the Fed has been able to facilitate some major rallies via various efforts, but it seems their influence is now fading. I will probably short the next "Fed" rally should it fail, as it may represent a loss of trust in the ability of the government to rescue our economy.
See you on Monday
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