Friday's action for the market was pretty bad and we saw distribution with a large drop. The DOW lost 163 points and Nasdaq followed suit with a 47 point loss. In the face of this major distribution day, we saw Sprint regain most of its loss during the day by market close. Also, the drop came on declining volume. That is pretty encouraging in my opinion. I will continue to hold my position for now and see how it plays out. I shouldn't need to remind you that in a bear market, 3 out of 4 stocks decline. Trying to find winners to the upside is very difficult in a bear market since the odds are stacked against you that you will be wrong 3 out of 4 times. We are not quite in a bear market yet (usually defined as a 20% decline from the top), but we are definitely in a correction. Markets are also nervous about the financial regulation legislation in the works. Once some kind of financial regulations pass, that would help eliminate some of the uncertainty from the market. In the meantime, the oil continues to spill unchecked into the Gulf of Mexico and the economic and environmental damages continue to mount. (A new estimate puts the spill at 70,000 barrels a day. To put that into perspective, if that is true, then we have the equivalent of an Exxon Valdez oil spill every four (4) days). Folks, despite everything you might read about BP stock being a bargain, I wouldn't touch that stock with a 10 foot pole until they cap the well and we have some idea of the damages they will be facing. I would not be surprised if the stock tests the previous low set in 2009.
One stock to keep an eye on appears to be IBM. It is trying to break out of a base, but the market action seems to be keeping it in check. When the market finally turns, I wouldn't be surprised to see IBM as part of the leader pack. Remember, market pull backs are a great time to hunt for new opportunities and identify stocks that may break out as the next bull run starts. Again, I am not advocating going out and buying the stock now because I am bearish on the market, just pointing out that despite all this negative action, IBM is still showing a positive bias.
While the market is in a downtrend, you may also notice the pattern that the market may rally early in the week and lose ground towards the end of the week. This generally happens during times of uncertainty where traders don't want to hold positions open over the weekend since there is a lot of time where negative news can decimate a stocks value. When the tide starts to turn, you may see the opposite when people are more willing to hold onto their stock positions over the weekend.
Have a great weekend (or whatever is left of it).
Updates next week might be sparse due to the busy week I have ahead of me.
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