Tuesday, January 20, 2009

01.20.09 - Heading Towards a Retest

With the passing of presidential powers now complete, it is clear that we are heading towards a retest of Thursday's lows for the S&P 500 (that was at SPY $81.72). Leading the plunge, the financial complex (XLF) is back well below its November '08 lows, now down over -9.8% on the day. Although the recent pattern has been for a late day reversal, over longer periods of time and with tick and negative volume as bad as they are, I think it best to wait days like this out when considering counter-trend plays.

12:10PM PST - We've broken out of the trading range and are into November 20/21 territory. It it very difficult to draw support at this point. I probably will nonetheless cover my hedges at the close and reassess in the morning just based on the extreme range of the move. I will not play any added long, however. This is not normal market behaviour and it's not worth the risk in my mind.

Never Investment Advice

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