The market is a tennis match

And we are all sitting right in the middle of the court. We are in the middle of a war here in the market right now. We have a situation where the markets are "trend-less". It is trading in a range of indecision and any news sends the bears or the bulls running. Only to have another piece of news switch the ball to the other side of the court.

When I sold all my open positions last week it was to protect the gains I had accumulated up to that point. And I have not recommended taking any new positions since that time because when the market is lost, like it is now, and trying to find a road to take we don't know if the trend will go up or if the trend will be to the downside once it makes up its mind.

When the major indices are trading in a range between two points it is pointless to try and take new long or short positions until the market shows us her cards. The key is when the indices move up or below the current range they are in. Only then we can determine some sense of market direction. Until then it is safer to wait it out. I feel the only thing that will have a large enough impact on the market direction will be the FOMC meeting announcement on Thursday. The wording of their statement will be pivotal in helping set the market on some sort of course. Until then we may have some more extreme swings in the markets. And trying to swing trade while these emotional fluctuations in the markets are taking place is just asking for trouble.

Some would say that since the market seems to be in trouble here should going short be the best thing to do? Yes, if the market trend was to the downside. But we don't have a trend here. What we have is fear and greed battling over every morsel of news thrown into the pits. At some point either the bulls or the bears will be driven out and what were left with will decide how we should position ourselves for our financial benefit.

An example of the feeding frenzy today is the news that came out around 2:30 that Goldman Sachs may have some problems relating to the sub prime woes. That news sent the bears charging into the pits and devoured all the bulls within a couple of hours. The chart shown here is a 5 minute chart of today's trading on Goldman Sachs. Pretty scary chart.

Now what happens next to Goldman Sachs will depend on what the details are of this sub prime issue. The sell off in Goldman Sachs today was more of a "sell and I'll worry about it later" reaction. People did not want to take any chances and they sold out quickly. Now it may turn out that the news is not so bad after all and then we will have a surge of bargain bull shoppers running in to grab up the pieces left by the bears. But only time will tell.

The financial sector was a big downer today (helped along by the GS story). When financials start selling out then that sends a new type of fear into the markets. And a type of fear that we have to watch and see how it unfolds. Adding more salt to the wound was a report that the SEC is looking into Bear Stearns and their restatement of losses at one of their hedge funds.

And to top off the day (actually started the day off) the housing data was released and it showed that existing home sales fell to the lowest level since 2003.

Just where does all of this leave us? A lot of people are licking their wounds tonight. They got burned big time by the massive drop today. At mid day we were having a bull rally and then all of a sudden panic fear took over and selling took over in force. Left a lot of people with wounds to take care of tonight. Tomorrow should be a lighter than normal trading volume day because nobody knows what the market is going to do next. And because of this more people are going to nurse their wounds instead of getting back on the horse.. just yet.

Fp80