Securities Research Services

Friday, December 14, 2007

Cash Is A Good Idea Over The Weekend

Market conditions are tough; as tough as we have seen. The battle for the trend continues and trading is extremely choppy and arbitrary.

Stocks appear to be under distribution, but getting aggressively short is not an option yet. Shorts who push their luck are likely to get pinned against the wall in a Santa Rally, which remains a possibility; perhaps a probability.

Meanwhile, long positions are very vulnerable and failure rates on the long side of the trade are at least as likely to fail as they were last month.

So, what to do?

There are some good reliable downtrends that can be shorted. However, it is important to short strength and not weakness. This is a market that makes price chasers pay the price of stopped out trades.

We need to wait until prices come back to us. Yesterday we attempted a couple of shorts, but the prices moved down and not up into our entry areas. It remains highly likely that prices, even if they turn lower today, will be coming back up to areas where short positions can be put on.

Yesterday we closed out the last of our trades. In this market it is healthy to sit out the weekend in cash. Next week is a new ball game and if we wait, we will get the right set ups at the right times.

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