Thursday, July 3, 2008

Entry for July 3, 2008

Ok, another lessoned learned: as I quote myself from my last blog, "Fundamentally the financial sector and many soft spots in the economy are still looming. this tied with strong spike in volume with todays drop in the equity markets makes worried that a bottom may not be found in the 1270's range. Fundamentals, technicals, and current sentiment do warrant further movements downward along with agreement from the max time frame chart on the s&p500 (which is still in a down trend)..." And it is so that within the past this past week that the S&P traded at 1280 and 1284 at the close of Jun 30 and July 1st respectively with lows going as far of 1260, as the candle sticks will indicate though the bulls did indeed defend support of the 1270's range for two days that there was more bearish momentum as indicated by the shadow of 1260 on July first, which would have been a good indicator of further downward movements. So overall I would have been wrong as this have not stabilized at all but are quite volatile within a range of 1250 and 1280 for the past few days. The lesson learned is that one should stick to what is shown, as there were weak fundamentals with agreement on technicals for further movements downwards. The psychological effects of supposed support of 1270 was of a short lived nature, as more clear support of 1260 maybe forming now. The correct move would have been to short on 1300 levels, of the time from my last blog, and then to have covered in the 1250 range however covering at current levels of 1260 still would be profitable (assuming no taxes or trading fees).

And so now...

I will have to take a contrarian stance for the upcoming week. I say the S&P500 may reach or break out of levels of 1280, however for the month it will probably trade in a similar range as support needs to be performed. Its possible by the end of the week or into the beginning of the next week the s&p500 will have a small rally. Though, in the beginning of next week the s&p500 will trade sideways or will experience further downward movement as bearish sentiment may carry into the beginning of next week.

I'm putting more weight on the contrarian approach for the upcoming two weeks since there what I believe to be too much of a build up of bearish sentiment. Between extreme downward movements from oil, jobs reports, and more worries stemming from the financial sector, would seem to indicate further movement with again agreement with technicals, however I think it is at a point where the cards are so low that a bounce of good is going have to come out of the culmination of bad.

Overall, all this bearishness is making me see more hope for the faster recovery in the economy. If the economy keeps getting beaten down, its just preparing to stand right back up, the faster and harder the beating the sooner it will probably react in opposite direction. (one can only push things so far before it pushes back).


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