Stocks on the Decline?

After Tuesday's big triple digit loss, bullish investors were hoping for a rebound on Wednesday. However, markets closed on the downside yet once again, having the Dow close down 60 points. For now, the double day downer is rather significant when you consider that, recently, most big down days were immediately followed by big rebound days. That chain was broken today. Now, be on the lookout for a potential rally either tomorrow or Friday, because I do not see this market completely sinking all at once into a stock market crash at this point and here are some reasons why.

Much of today's negativity rooted from more turmoil in Europe. Protests have broken out regarding Greece's monetary dilemma and concerns for Portugal's credit rating are rising. Although there were some positives for the day (S&P earnings upgrades and ADP employment increases) they were muted by the negatives. I do feel that we indeed now have some downward momentum, however, I feel that a slight rebound is due Thursday or Friday. With the optimistic report from today's ADP number, Friday's unemployment report could be rather favorable. If numbers were to come out as a positive surprise to investors, markets would be primed for a strong rally. So I am on the lookout.

As I discussed in yesterday's post, one thing I am tracking closely at this point is the VIX levels. VIX was up nearly 5% today as investor's uncertainty grows. As the VIX does usually contradict the overall market direction and may have some weakness today or tomorrow, here is a nice exchange traded note (ETN) pushing out some rewards for the rising VIX. VXX, the VIX short-term futures ETN, has enjoyed some nice strong gains the past couple gains. For those that feel market uncertainty has a good chance of increasing here in the short term (me), VXX is a great option to consider. Beware, it can move with some volatility, but that can be rewarding on the right side.

Charts for SPY show some good technical trends for a potential pullback. I added some put options as well as bought into some SDS yesterday. Even with a rebound, I feel that these positions should reward me in the next coming weeks. After evaluating what we do during tomorrow's trading day, I may try and pick up some longs to take advantage of a potential rally on Friday. So, we will see how it goes. Happy Trading.

Posted in Labels: , , |



    Stocks will always bottom and than recover over time.

  2. GG. Says:

    I'm glad you wrote this in the blog anal fingering