I don’t trust today’s strength, and may use the last hour of trading to initiate some small short positions. The reason for my distrust is twofold.
I believe the market is overreacting to comments from Bush that do little to address the subprime problem. Unless he is willing to provide federal aid to subprime borrowers, the problem will get worse. El Presidente has pretty much laughed off the idea of helping this group. Greedy, irresponsible corporations and hedge funds get bailed out of their mistakes, while the hard working Americans they preyed upon don’t. As my man John Lennon would likely say, the “working class hero” doesn’t get shit from this prez.
Off the soapbox and on to the second point. The market historically does well today, and the move is on low volume. What this says to me is that today’s bounce is a meaningless victory for the bulls.
I still like the momentum stocks on my watchlist. However, I’ll look for better entry points.Stocks such as GRMN, NOV, CROX and FLR, to name a few. Most momentum plays are bouncing right into resistance, and that’s not where I like to enter.
I’m going to spend my research time this weekend focusing on tech stocks. That’s where the money seems to be flowing, so we may see the beginning of a new tech trend. I want to be properly positioned when it’s time to jump on the tech train.