What Next?

Posted by downtowntrader | 1/14/2009 09:55:00 PM | 0 comments »

The markets were very weak today, with most of the major indexes down over 3%. The indexes are only 7 days from recent highs, and yet some are already close to their December lows. I would say that things are starting to get oversold quite quickly, and that the markets should get a bounce back fairly soon. The question is, do we rally from here into the inauguration? Continue falling into the inauguration and rally afterwards? Do we test the November lows before a bounce? Do we bounce weakly and setup for breaking the November lows? Do we completely crash?

There are so many possibilities right now, and in my opinion, it's too dangerous to be leaning too hard to either side. The danger of a snap back rally is quite high, yet, the markets could really slide for a few more days as well. For the most part, I have been going home flat since early January. The only swing trades I have made recently are a few shorts and long oil. If you choose to hold overnight, think about reducing position size with a larger stop, as it looks like the VIX is bouncing and that could lead to more frequent gaps.

Good Trading,