Nasdaq Undercuts Its earlier June lows Ahead Of The Fed Two-Day Bore-Fest

June 24, 2008

Today was a much quieter day overall compared to Friday and in fact I took most of the day off as I helped with a youth activity summer camp. I am supposed to work the rest of the week during the times the market is open but I have a feeling in this environment I am probably making the right decision as volume is surely (but not always) to come in lower the next couple of sessions until the Fed announces its rate decision.

The mixed trading on lighter volume is normal ahead of the Fed which has recently become famous for unleashing very volatile intraday sessions the day of the announcement. But going into the announcement we really are not setting ourselves up for a very positive catalyst as stock indexes have been weak with all of them undercutting recent lows on the big-cap indexes. The Nasdaq joined the rest of the market today closing below its June 12th lows and it reached its lowest price since April 22. That is clearly a sign of a weak market. This sort of action is picture proof to me that we are just not in a healthy market environment and that the proper way to play the game is to be defensive.

There wasn’t too much action today that caught my attention that I felt that we must go over but I did notice that high put/call ratio of 1.25 has come in to a .85 reading signaling that the complacency of the possibility of higher stock process has returned. But it returned on a down day which shows that a high put/call ratio is no guarantee of a new rally. Why? Simple. The market is too weak. Even with the “dumb money” buying puts it dont matter because the market is just so week. I think today alone there were 117 new 52-week highs to 494 new 52-week lows. When you have a market this weak, it is going to take more than a high put/call ratio and an investors intelligence ratio that shows the bears barely beating the bulls. No, what this market STILL needs, it would appear, is another washout.

There just are not too many bull markets that can last a long time without the banks moving higher. And for those that know how to visually use charts it becomes extremely obvious that we have some problems in our big banks that run our big market. Overall itis a bit of a mess and I just can not stress enough how important it is to be careful with buying too much of longs or shorts in this market. For right now, until a clear obvious trend shows up, I believe it is time to play defense and that is what I will be doing.

The best bet for longs is the energy sector which has the most stocks hitting new highs and for those looking for shorts banks are where it is at.

I don’t have a whole lot I can add from heer as I was gone most of the day with various errands and the same thing should be occurring on Tuesday. So I think I am going to wrap up the commentary here as there really is not a whole lot more to talk about other than to advice you all to take some profits in, hold your best longs, cut your laggards, and protect that capital. Eventually this leg of the next downtrend or sideways choppy market will turn into another bull market. We just have to be patient and protect our capital while we wait for that perfect momentum to come again.

We will have another bull market and when we do get the next “REAL” bull market I will be ready with a lot of capital that many amateurs are about ready to lose. Aloha and I will see you in the chat room where hoepfully I will make more sense. I am writing this practically asleep.

To sum all of this up: We wait for a better market to really put our money to work. PDO is wonderful but besides PDO we sure don’t have much else.

ALOOOOOOHA!!!!

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