Monday, July 7, 2008

Up, Down and Mostly Nowhere

If today's trading was to be compared to a roller coaster ride, that analogy would be most appropriate. Stocks took a wild ride on Monday, up, then down, then back up and eventually down again.

Dow 11,231.96 -56.58; NASDAQ 2,243.32 -2.06; S&P 500 1,252.31 -10.59; NYSE Composite 8,400.21 -81.33

To the untrained eye, today's charts would seem to show that investors didn't know what they were doing, but, in fact, they did, and they did it quite well. First, they cheered the drop in the price of oil, then the realization that even at $140 per barrel, it still was expensive, and the selling ensued. In the afternoon, an oversold condition brought out bargain hunters and short-covering traders. Late in the day, market realities took hold and all indices ended lower.

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Traders should become accustomed to this kind of market. There's no direction except down, but various false bottoms could be put in place, sparking rallies which could turn on a dime, such as today's.

With the market in such a fragile condition, earnings reports are likely to engender moves in both directions.

The internals, however, are still quite negative. On Monday, losers beat gainers, 4326-2028. New lows overwhelmed new highs by an incredible 1137-43. That is the largest margin since March, when the markets were carving out new lows, as they did today.

As mentioned earlier, oil tumbled $3.92, closing at $141.37. Gold fell $4.80 to $928.80 and silver lost 45 cents to $17.92.

All told, everyone had a grand time, despite the unstable conditions. Most of the bullish crowd is waiting for the inevitable bounce, though they know in their hearts that even a 500-point move on the Dow could be very short-lived.

NYSE Volume 1,522,468,000
NASDAQ Volume 2,351,769,000

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