Online Stock Trading | Stocks Searching for a Bottom

Stocks Searching for a Bottom


Filed Under Market Commentary |

2:00pmEST Stocks try to rebound off of MSFT earnings news but, reverse hard at the close.

MSFT blew the doors off its earnings in Q4 and set the ton for stocks early in Friday’s session. The NASDAQ, S&P 600, Russell 2k enjoyed much of the morning higher by over 1%. It appeared to most that stocks were going to find a bottom. However, big institutions had other plans. By the end of the day all major indexes had reversed hard and closed down, down big. Institutional selling hit the market hard in the afternoon showing the path of least resistance is still down. Volume did however finished to the lower side, avoiding a distribution day on Day 3 of an attempted rally.

It should come to no surprise that the big brokers on wall street are beginning to announce massive layoffs. Citigroup, Lehman, Goldman, Merrill Lynch, Bank of America even will be laying off many of their investment “professionals.” This will not help the psyche of the trader. In addition to layoffs, look for more write-downs due to sub-prime mortgages.

Lets move onto some charts:

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Notice the nasty reversals on Friday. Although we may see a follow-through day, action like Friday’s is not encouraging for a sustained follow-through rally.

Notice the VIX making new highs when the market had already taken out the August lows. The VIX has simply not priced in any fear and has not shown any selling capitulation. Look for the VIX to spike well above the 30 mark to get us close to a bottom.

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