Thursday, February 01, 2007

Wrapping Thursday

I'm baaaack! We saw that the weather was supposed to get bad this evening over the East Coast so my bride and I left early and came home. Just in time for this afternoon's follies. Even though the INDU made a new record the market seemed a bit flat. That is reflected in the VIX chart as shown.

This, and other indicators, are troublesome. First, while the VIX can and has gone lower - it doesn't look as if it is ready to do so at this minute. It went outside of the lower band yesterday and again today. The volatility in the bands is about a tight as it will ever get and there is truly only one way for the VIX to go and that is up. The problem as we know - this is the time of the month for the influx of 401K money and that means that the market has to go up. These two things can't co-exist - so I'm betting on the market going down tomorrow and maybe for a day or two next week.

"Betting?", you said, "Betting?" We're not "betting" we're "investing" - Right. Bet me.

I have my reasons - and we'll get to those presently.

Lost KKD to a stop loss but I'm thinking that I will wait for the market to rest a bit and maybe take another bite of that apple (or doughnut). Speaking of AAPL, it's been on quite a ride for the past couple of days. But it too has broken through its lower Bollinger and one thing about AAPL - it isn't a low volatility stock so I wouldn't be surprised if the dippers jump in tomorrow and take some - it has had 11 out of 12 recent closes below the open.

GOOG had one of those "long squeezes" today where the stock has the floor drop out from underneath it and the price falls precipitously and all the longs start selling with both hands. It didn't go down the 35 points that the implied volatility suggested but there's time yet. That leaves MSFT and it went down today as well.

I sold out of DRL today for a loss of 8 cents. My theory is this - if the action of the last two days didn't move the stock I don't want anything to do with it. Of the three stocks I showed the other day from that filter - XOMA went up 1.96%.

I also dumped LUV today for a 20 cent loss. I don't know what oil is going to do other than drag down airlines so I decided that with that much uncertainty it would be better to be out of the airline sector.

I believe that the market goes down tomorrow because there just isn't that much left to buy - The up/down ratio is 63% which isn't too bad but the new 20-day high/low ratio is 89% and that bodes ill. My filtering compatriot over at Dogwood's BLog linked to an article the other day from trading markets where they have discovered (using 5 million trades) that stocks that go down have a better chance of going up than stocks that go up. Of course readers of this BLog have long known that - it just isn't a secret - our motto - buy the dips sell the rips.

The VIX is neutral but despite that the story is told on the Bollinger Bands. All four major indices as well as GS printed strong white candles in the closing hour and whenever that happens the market usually goes down the next day. I'd much rather see a mix or all of them finish down.

Because it is possible for the funds to put the 401K money in the bank for a couple of days and wait for the inevitable dip I don't think that you will see too much action tomorrow. My forecast then is for a down market tomorrow.

The magic coin says ... Heads - we disagree again - the market is going up.

Given Tuesday was an up day and Wednesday was no call, both the coin and I gain a win. The score is now Marlyn 8 - 5 and 2 and the coin is 6 - 7 and 2.


TradingGoddess said...

Looks to me like you are indebted an I.O.U. to your lovely bride!

In this fast paced, insane world we call Wall Street, do not forget to take the time to enjoy what is really important!

Just my unasked for (as usual) two cents.



Outstanding material