Friday, June 20, 2008

About Shark Watch

Friday, June 20 - 4:27 PM

Afternoon Comments

While the heavy volume can be blamed on quadruple witching, there’s no getting around the fact that it was an ugly way for the market to close out the week. Breadth finished just shy of 4:1 to the negative, the indices lost, on average, 1.99%, and each of the major S&P sectors lost ground with financials, tech and consumer discretionary leading the way lower.

The thing that has us concerned is the technical conditions of the major indices. The Dow, for instance, is only 0.87% above its closing lows from March, and with the Nasdaq and the Russell 2000 having held on better than the blue-chip average over the past couple of weeks, the wave of selling that could ensue should the 11,740 level be breached would cause some widespread losses.

Just about the only silver lining right now is that, after a week of heavy downward pressure, conditions are supportive once again of an oversold bounce. The bulls’ best hope is that a sharp reflexive rally kicks in, holds, and then some positive news helps get folks nervous about possibly missing out on another uptrend like the one we got after BSC was bailed out. Will next week’s Fed decision serve as the catalyst to make that happen? We’ll have to see how that plays out, but for now, the key is to protect our capital, and not try to be a hero.

The bottom line here is: TGIF.

Have a great weekend and we will see you on Monday.

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