Stock futures are pointing strongly down before the open. The S&P 500, Nasdaq 100 and Dow Jones Industrials all fell this morning, which usually augurs a stock market selloff - just as stock futures strongly up usually mean an up day. This does not mean that the market’s apparent bounce off the bottom of its channel (discussed in my most recent newsletter issue) is invalidated, because an index - like a stock - often needs multiple tests of a support level before it can take off.

Thus if the market does sell off back to the 11,000 level, it is not cause for panic. To the contrary, for the market to find support there again would presage a nice rise back toward the upper channel line.

FINANCIALS:
These are poison for any long stock position until further notice. This goes for all financials - brokers, banks, mortgage-related and insurance. If you assume the other shoe has dropped for Citi and Bank of America, you are gambling. Save it for Vegas. It is not just the subprime, either. Even with my SuperPut strategy (buy a long-term put to protect a covered call position), why buy a stock that poses considerable danger?

HOUSING:
Don’t go there, no matter how tempted by the “bargains” available. The recent “surge” in housing starts was phony, a result of NYC changing its definition of what is considered a housing start. Eliminate that, and housing starts fell.

This entry was posted on Tuesday, July 22nd, 2008 at 8:08 am and is filed under Markets/Economy, Sector/Industry. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.