Day Trade the Momentum – Bullish Bias Likely the Rest of the Week!

August 27, 2008
Author: Peter Stolcers, Founder of OneOption

Yesterday, the market declined after the FOMC minutes were released and there was a nice little shorting opportunity - if you took profits. As I mentioned in yesterdays commentary, this is a day traders market. The moves intraday are somewhat predictable once the moment has been established. On the other hand, overnight moves are random and the risk of carrying positions is greater than the reward. This morning, durable goods orders rose more than expected. Contrary to my belief, transportation orders boosted the number. Capital expenditures rose and that sheds a glimmer of hope in an otherwise depressing environment. Oil prices are moving higher. Inventories decreased by 100,000 barrels when an increase of one million barrels was expected. Hurricane Gustav and the Russia/Georgia conflict will keep energy prices elevated throughout the week. The well-received Fannie Mae and Freddie Mac auctions have calmed anxiety in the financial sector. Traders are waiting for the next shoe to drop and the XLF has not budged over the last 6 trading days. Tomorrow, we will get the GDP and initial jobless claims. The GDP has been on a steady decline this year, but it still shows growth. As long as the number stays positive, bulls will live with it. The initial jobless claims have decreased the last two weeks and another decline would certainly be bullish as the market prepares for the Unemployment Report next week. I feel both reports could have a slightly positive affect. It's possible that we will see a bullish bias to the market over the next few days. In the absence of any major news, end-of-month fund buying could push the market higher. Holiday weekends also tend to be bullish. This is a very light holiday trading environment and no one will stand in the way. The A/D is a positive 2:1 and the early momentum favors the bulls today. Overseas markets were quiet and they did not provide any impetus. If you choose to get long, I like commodities stocks at this level. Day trade the stocks and exit your positions by the end of the day. Do not construe my comments as being anything more than a 1-2 day guess. This is a nasty, directionless market and it can not be trusted. It is simply chopping back and forth and you should trade very small size or avoid trading all together! image

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