This is why it pays to try to understand the markets...

The theme of my blogs is ALWAYS to provide my insights so that you and I can make informed and hopefully correct decisions...

Knowing is half the battle.

Today I am sure many investors who simply listened to the media and were on the long side got caught off guard. If you have been reading this blog you would at least have been aware of the fundamental and technical reasons to be vigilant right now. Hopefully this allowed you to act in a way that protected you. I have been warning since we bounced off the 200 SMA on the SP that this is a very dangerous market to be long in now except for a few very strong stocks. In my post: Holding Pattern (see recent posts) I argued that we should all tread very lightly either on the short or long side until a new trend was firmly established. This was true... and proved itself this week as the market swung wildly.

Personally today was quite solid but the techniques could have been better to achieve this. I didn't have the patience to wait and got too short to soon by getting in several days ago. Didn't follow my own advice (you ever done that to yourself?!). I hope you learn from my impatience... I was wrong in the technique even though being short paid off today (but looked terrible yesterday!... short term.... and would have cost if the SP had broken the 200)... ------------------------------------------------------------------------------
So where do we go from here?
The new trend looks to have been established. We closed(important not just to hit but to close) convincingly below the 50 on the SP and below the 200 on the Naz. There was a rush at the end of the day to sell... in part because it was clear we were going to close below support. On Monday we may re-test these areas but I expect strongly that they will fail. If they do... it's the best time to go short...

Longs except for the strongest stocks and/or very long term plays with catalysts look to be in trouble. I would sell on the bounce if we re-test the MA's and fail on Monday... again do your own DD.

Here is where I am at the moment...

I still hold SDS but sold SRS. If I have time to watch the markets Mon and we fail a retest of the MA's or just head down from the start I will get back into SRS. If it passes 90 it appears to have no resistance until 100. SRS is a great play AFTER it's resistance of the 50 was broken... I got in too early... and almost paid for my mistake... sold today where I got in... but now that it has broken resist with confirmation next week it is a very good buy in my opinion. I would place a stop just below supp if I get in. Please check this for yourself... never just trust anyone else...

POT- this stock held up very well. I continue to hold this. Normally I believe in the rule "never let winners turn into losers and never give back over 50% of gains". With this stock... it has so much potential that I will probably hold at least some regardless and will consider adding more on dips. It is possible for a stock like this to remain on an uptrend even if the market is on a downtrend... if so... who cares about the overall market with this stock?

DSCO- didn't flinch today. It's performance has almost nothing to do with the market. I still hold the very small position I got in with.

CMED.- Bought a little more. This is a long-term fundamental play with an earnings catalyst coming up next week. This stock is technically very weak... Soros and Danoff at Fidelity Contrafund have liked this stock in the past because of it's long-term potential. A new analyst came in recently and raised the earnings expectations ridiculously (to throw off the averages and make people scared that this company will not meet its quarterly numbers...)? they may not due to this but it doesn't affect the fundies... and the big buy orders came in today when I looked to buy around 34.... I think this stock is being knocked down so that someone can accumulate for the long haul... remember earnings are not affected by the US economy on this... we have a stock trading at a forward PE of less than 17... for a company growing cash flow at 30-35% a year... Please... this is a tricky one short-term... it may bounce to 40 but in this market it may not either... this is a fundamental value play... learn the nuances of this company or don't get into this stock...

There are many others that I like. Health care stocks are going to be big I believe going forward... biotechs and the like... the stocks that I understand best... I just started looking at DRRX and ONI. No opinion yet.

Mostly though if the second leg hits hard I recommend... 1)move out of most longs and 2)perhaps look to go short...
Best in this difficult market... a great time to hold cash and learn... both fundies and technicals...

Have a good weekend. My next post probably won't be until Sunday night or Monday...
This blog is for informational purposes only. It does not give investment advice.