Free Newsletter: Stalking Stocks with the Shark - Averages Finish Lackluster Session Mixed - 08/26/08

Free Newsletter: Stalking Stocks with the Shark - Averages Finish Lackluster Session Mixed - 08/26/08

Greetings Shark Investors:

Indications were for a flat start following the previous day’s big point losses and declines in overseas markets. About the only news on the wires early on were announcements from APC and COH that they had both authorized share repurchase programs, that AEO had beat earnings estimates, but had lowered its guidance for the third quarter, and that the Case-Shiller home price index showed a 15.9% year-over-year decline in home prices versus expectations for a 16.2% drop.

As such, the major indices opened the day slightly to the downside, and spent the first hour or so chopping around the unchanged mark, showing little reaction to some mixed economic data. Specifically, the Richmond Fed manufacturing index showed a reading of -16 versus expectations of -10, July new home sales came in 10K short of the anticipated 525K, and consumer confidence for August came in at 56.9, improving from last month’s reading of 51.9. However, about a half-hour after that data was released, a wave of broad-based buying kicked in, sending the averages to what would turn out to be the best levels of the session.

Unfortunately for the bulls, that updraft proved to be short-lived as the indices quickly moved back towards the flat-line as we headed towards the New York lunch hour. For the next couple of hours, the market continued to churn, as investors greeted the minutes from the most recent FOMC meeting with a resounding yawn. Rising prices, soft labor markets, tight credit conditions and weak consumer demand are issues market players are already very familiar with, so it was not surprising that the news did not result in much of a response.

However, conditions began to deteriorate as we worked our way into the afternoon as financials, tech, industrials and consumer discretionary began to lose steam. Meanwhile, energy rebounded after a mid-morning pullback from highs as concerns began to grow that Hurricane Gustav would threaten energy assets in the Gulf of Mexico next week.

Still, the market was able to recover as we headed towards the closing bell as those same sectors which had seen pressure earlier in the afternoon moved sharply off their lows in the final 90 minutes of the day. By the close, both the Dow and the S&P 500 were able to finish with gains of 0.23% and 0.37%, respectively, while the Nasdaq closed lower by 0.15%. Volume, meanwhile, was once again quite light, but was higher than Monday, which was the lightest volume day so far this year.

Although the action was dreary, one silver lining is that the selling pressures from yesterday eased and each of the major indices was able to close above short-term lateral support levels. That said, the averages continue to look precarious from a technical perspective. The market continues to struggle in this thin trading environment, and even though the intermediate uptrend which began back in July is technically still in place, we are close to putting in another short-term lower low to pair up with the two lower highs we’ve seen since the rising wedges we talked about were breached two weeks ago.

The most important thing that individual investors can do at this point is simply accept the fact that trying to squeeze a profit out of this market continues to be a tall order, and that there just isn’t a whole lot that is working out there right now. As we’ve been saying, at some point, conditions will improve, and we will be able to begin picking out the tremendous opportunities that will be created from all of the turmoil. However, no amount of hope will make that happen any faster. Above all, we need to make sure that we stick to our own personal styles of investing and make sure that we don’t start forcing trades in an uncooperative market.