Free Newsletter: Stalking Stocks with the Shark - Market Recover From A Poor Open To Finish Mixed - 8/21/08

Free Newsletter: Stalking Stocks with the Shark - Market Recover From A Poor Open To Finish Mixed - 8/21/08

Greetings Shark Investors:

Although the major indices finished Thursday’s trading session in mixed territory, all in all, it was a decent day for the bulls as investors were able to look past a $6 spike in oil and disappointing economic data to take the market higher after an ugly open. Indications were for a sharply lower start to the day following poor action in overseas markets and an early 2% rise in crude prices. Although index futures were able to improve a bit after a slightly better than expected reading on weekly jobless claims, which showed a 13K decline to 423K after last week’s number was revised lower to 445K, the improvement in sentiment after that news was short-lived.

As such, the market began the day by gapping lower, but buyers were waiting in the wings to take the indices off their opening lows during the first hour of trade. After that, conditions worsened once again on the heels of worse than expected readings on the Philadelphia Fed Index, which showed that manufacturing activity in that region contracted for the ninth month in a row, and the index of leading economic indicators, which came in at -0.7%, versus expectations of -0.3%.

However, buyers once again stepped up to the plate, taking the market off the lows for a second time. For the rest of the morning and into the final hour, the market was able to make steady progress to the upside, erasing the early deficit and moving us into mixed territory Although to upside momentum slowed into the close, both the Dow and the S&P 500 were able to close with gains of 0.11% and 0.25%, respectively, while the Nasdaq closed 0.36% lower.

Given the fact that buyers looked past higher oil and a weaker dollar to engineer a respectable intraday reversal is a positive. Unsurprisingly, energy and materials were the big winners on the day, but both consumer discretionary and industrials were also able to post solid gains. Moreover, even though tech, financials, staples and healthcare were the laggards, each of those sectors also finished well off the lows of the session.

At the same time, however, volume was the lightest that it’s been all week, and that’s saying a lot. Certainly, though, we’re sure to hear from so-called market experts that today’s action shows that the selling earlier in the week was simply a minor blip and that the market is ready to resume its move off July’s lows. We’ll see how things develop from here, but the major indices took some undeniable technical damage on Monday and Tuesday, and the action over the past two days, while encouraging, does nothing to repair it.

The bottom line is that individual investors will be best served in this environment by continuing to keep their time-frames short, picking their spots carefully, and taking profits into strength. The market will tell us when it’s time to start building more substantial positions, and that has yet to happen.