Bears Growl

The bears took the markets down hard today. The blame fell on the Chinese drop overnight and possibly on the Cheney bomb attempt, but in reality, these markets have been due a correction for quite some time now. Days like today are a swing traders nightmare because you are holding positions overnight, mostly weighted to the general trend (up until today). I took a beating from the premarket on, although I think I did a fair job of maneuvering my way around some stocks. I also saw some really weird stuff happening today on NYSE stocks, as others reported seeing too(Kevin, JC, Bill). I was watching MR as it dropped 65% to $10 and then pop back up to $25. There were a few trades down there and I even tried buying some, but the ask was stuck at 24.50. Now, it is showing the low of day as 21.11. I saw crossed bids, stickies, market orders not filling. All the sorts of things you can expect to see when a system is overwhelmed with volume. So what happens next? I can't pretend to know, but I have to think that an intermediate, if not a primary top is in.

If you think about the psychology behind a top, there are a lot of people that were hurt with todays drop. They will be itching to get out on any bounce that occurs in the next days and weeks. This should cause a supply imbalance, absorbing any buying. I don't know if the markets bounce immediately here, or if they follow through tomorrow, but I can't fathom institutional money aggresively buying here. I think the best course of action for swing traders is to sit tight and manage your open positions as best you can. There should be a low risk buying or selling opportunity soon. Daytraders should find the increased volatility refreshing, and I even bought a couple things today, looking to fade the panic selling. Should be an interesting day tomorrow to say the least.


Good Luck,





DT