Free Newsletter: Stalking Stocks with the Shark Mixed Session, But More Progress - 8/17/08

Free Newsletter: Stalking Stocks with the Shark Mixed Session, But More Progress - 8/17/08

Greetings Shark Investors:

Despite some early gains in the morning, another pullback for commodities, further strength for the U. S. dollar, and options expiry, the market muddled through what turned out to be a rather lackluster trading session on Friday to finish in mixed territory. Following a 3% bounce earlier in the week, crude prices were on the retreat again early in the morning while the greenback was rising against foreign currencies, and as a result, indications were positive start to the day. Although index futures did pull back from their early highs on the heels of better-than-expected earnings, but disappointing guidance, from retailers ANF and JCP, they were able to recover ahead of the bell after a surprising reading on the Empire State Manufacturing Index, which came in at 2.7, versus expectations of -5.0.

As such, the market opened in positive territory, building on its initial gains in the first few minutes, but falling right back to the unchanged mark within the first hour of the day. Although the indices were able to bounce right back and move back to just under its opening highs, that second trip only allowed the averages to visit those levels briefly before retreating once again as we worked into the New York lunch hour.

After those quick swings, the action died down considerably as the afternoon got under way and the averages drifted sideways in mixed territory. The shift in the level of activity was quite palpable, and was also evidenced in the pace of volume. According to our intraday volume chart (one of our new publicly available features which allows you to track how volume is progressing through the day and compare it against previous days), it was looking like volume would be much higher in the morning, but it quickly lost pace as the afternoon got under way.

Although the troops were able to mount a bit of a charge into the final hour, it wasn’t enough to bring the Nasdaq back into positive territory, but by the end of the day, the indices were able to close with respectable gains, on average, of 0.25%. Still, despite that modest advance, only two major S&P sectors, energy and materials, finished in the red, while consumer discretionary ended up leading with a gain of 1.17%. More importantly, the averages were able to make further technical progress after putting in what may turn out to be another higher low in the middle of last week.

As we have been saying, the overall action continues to be encouraging, but at the same time, it has also been quite frustrating for more active investors. Despite the cheerleading from the financial media and the proclamations from the perma-bulls who are absolutely convinced that we are at the cusp of a new bull market, we are still facing significant problems in the credit, housing and labor markets. While those issues may eventually be what helps this market climb the proverbial wall of worry, we are still faced with a very difficult trading environment. We have been seeing better technical set-ups, but the majority of those set-ups, it seems, have been followed by failed break-outs.

As such, the environment continues to demand short time-frames and tight stops. Without a doubt, the trading has been difficult, but as long as we make sure our primary focus remains on capital protection, we will be in a position to take advantage of the opportunities which will surely come our way as we move forward.