Securities Research Services

Tuesday, December 02, 2008

Interesting Development

Yesterday sellers came back from the holiday break and hit the market hard. Unfortunately, all this did was mess up the charts so as to keep everyone guessing what to expect next.

It is our gut feeling that this market has gone down too far to provide good shorting opportunities that are worth more than just a quick day trade. We are not convinced that the downtrend is resuming here and we have the idea that this may just be part of a bottoming process. What type of bottom is anyone's best guess.

What we do find interesting is this. [Warning: What follows is a bit data intensive] Today we scanned all stocks above $10 per share that trade at least 1 million shares per day. Of this group we discovered that more than half (about 55%) are showing bullish accumulation divergences. About 35% of these stocks are showing no divergences while only 10% are showing bearish divergences.

We don't know if this means anything yet and it is certainly not reason to start buying stocks here but it may be telling us it's too late to go short even while it's still too early to go long.

In other words, it may remain just a day trader's market while a base-building process works itself out.

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