Wednesday, January 05, 2005

Let the character of the bounce tell the story

The nasdaq has finally made the dip I have been expecting - just about 3 weeks later than I expected. The character of the inevitable bounce back up will fill in a lot of blanks about the current state of the market. The naz is at its lower bollinger band and 50 day moving average, so the best case scenario right now would be for the market to turn higher from here. I'm watching to see if the volume comes in just as high, or higher than it has been for the steep decline over the last 3 days if the bounce does come. It would be suprising because the volume has expanded a great deal for the decline. There is a lot of money on the sidelines because of portfolio rebalancing for the beginning of 2005, and a lot of speculative excesses have been given a good shake: NGPS, ANTP, TAYD, and many others that have more than doubled in the last two weeks have lost between 20 and 50%. However, we are in a rising interest rate environment, so caution is the name of the game.

My current holdings are SIRI @ $7.42 average cost, and ESMC @ $8.02. Both have shown strong support and held up very well during the last three days. It is too bad about LSCP and TASR breakouts failing, but the weak volume on the breakouts was a big red flag.

Sorry this post isn't more structured, I'm in a hurry.

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