Thursday, February 14, 2008

Equity Market Comment - 2/14/2008

Just about right on schedule was the ultra short term correction we had anticipated.
It is also possible although not likely that we took care of the entire corrective process in one day.

If this is to be the case then we should begin to see some higher prices tomorrow in order to complete the first leg up of a more complex structure.

The target for the final high of this complex leg is 1375 to 1379. From there I anticipate a larger correction than the one we just had or are finishing now.

Here are some of the seasonal tendancies for Friday, which is option expiration by the way.

February Seasonal for the 15th - Only a 50/50 proposition for an up day, so pretty much a non statistical event. However, tomorrow does hold the third best average returns for the month so if Friday is going to be a rally day it has some strong odds of being up strongly.

Still, this only ranks Neutral.

The Day Of The Week numbers are pretty bullish with Friday being the highest of all the days of rallying. 60% chance of a rally and also the highest average return of all other days.

These two combined rank Bullish

Pre-Expiration Statistics show Friday having the second lowest odds of a rally day, but still ranks 53% so this is rated Neutral. The Average Returns for Fridays in the week before expiration are the worst of the week with a negative 0.20%. This is rated Bearish.

The Holiday seasonality is the worst of the bunch, with Friday carrying the lowest chance of a rally day, only 31% and the worst average return of the entire pre and post holiday period with a negative 0.18%

This Is A Double Bear.

So, while I mentioned that the correction may have been taken care of in one day, the seasonality of the markets has other ideas and I always listen to the market.



The 30 min chart shows the S&P 500 making its way down to one of the retrace points, thus one reason I thought the short term selling pressure might be over.
Either way the element of risk is really only about 10 S&P 500 points from here.

Be leary of the market making an early strong rally back up to the 1361 area. If the market conforms to this set-up I would be an aggressive ultra short term short seller for a final leg down to 1339 +/- 3 points. This may be a bit short term focused, but it will be paramount to the condition of the market on the intermediate term front should this play out.

As it stands now, we view this as nothing more than a normal corrective process in an otherwise complex rally structure with the ultimate lows having already occured in the 1270 level of the S&P500.

One more note is the PUT/CALL ratio during trading today.
It showed some serious bearishness right out of the gate before the market even began to deteriorate. As I stated before, we need this to remain in the bearish sentiment levels as long as possible in order to keep the intermediate term rally in progress.

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