Tuesday, March 31, 2009


The day's actions were acceptable, but I would have liked to seen more neutral flagging. Neutral flagging is a continuation pattern for the down side. Pronounced sell-offs create reactionary rallies. The funny thing was that the day was actually half and half. It looks like we could have an inside day or a continuation of the sell-off. I am short like you wouldn't believe, 25% of it from EOD Friday, and I refuse to cover because there is no reason to do so presently.

The financials, especially the insurers, are in a heap of pain and the breakaway is more pronounced in that sector more than any other sector (surprise!). The insurers, such as HIG, MET, LNC, PRU, and AFL most likely started a new leg down. BAC, WFC, JPM, C, PNC, COF, and STI have all broken down, forming major breakaway gaps.

Looking at the rally from the start, the uptrend of many sectors are still intact. The financials are once again dragging the market down. To get the biggest bang for your buck, it's best to short the financials and not any other sector. However, don't trade them if you can't the volatility. The other sectors must follow the financials quickly for any meaningful decline to take place.


Damonleo said...

Could thursdays ruling on market to market be a market changer if the rule is relaxed? Any thoughts?

John C. Lee said...

Who knows. No one has ever encountered this situation before.