Pre Market - August 21st 2007

Going back to yesterday the biggest thing that stands out was actually the smallest thing that occurred. And that was the volume and the lack thereof. The markets were moving yesterday in slow motion with little conviction as shown by the low volume. Volume is always important in judging the health of any move be it a stock or a broad market index. The markets drifted yesterday on volume levels which were weak. This is why I was not buying much yesterday. With volume levels as they were yesterday it did not signal confidence in the markets.

The path of least resistance is always the direction you need to trade. As the present time the path of least resistance is still down. Don't rush your trades, there is no confirmation that a bottom has been established yet in this wild market. Only through a sequence of market moves (reaction to support and resistance levels, etc.) will the market show us its hand.

At 9am this morning Treasury Secretary Paulson will be starting to make the TV rounds. So watch out for a Government pep rally. You can bet that Paulson will make statements of how strong the economy is and that the current problems will all be worked out. I am always concerned when Government officials start showing up on the news show circuits. Remember the old expression "I'm from the Government and I'm here to help" ... LOL

Last night Capital One Financial (COF) announced that it was closing its retail mortgage business. This was another sign of the financial woes in the economy. But for investors of COF they view it as a short term positive because their closing of the mortgage business unit was like a trapped animal chewing off its own leg in order to free itself.

Watch how the markets react this morning to the retail earnings numbers that will be coming in this morning. There are some big retail outlets which will report this morning.

Remember to always look at the volume when trading. It is essential in knowing if a move is good or bad.