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A Breakout Lower or Just a Shakeout ? January 28, 2011

Posted by Tom in Thoughts.
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The headline asks the question that every mindful investor & trader wants to know.  Is this the correction we’ve been waiting for, or just a shakeout of the nervous money?

I don’t know, and nobody can be sure of either position.  So we wait.  Monday morning will likely bring a wave of selling, as weekend investors bail out.  The key will be the volume associated with those sales; just the retail public, or are the institutions participating?  Next thing to watch is if the selling volume begins to dry up; is the selling over for now.  Then, are buyers stepping up to buy at a discount.  Yes, monday and perhaps Tuesday, will be telling days.

Did the news in Egypt cause this?  Well, as a wise man once told me:  “A strong market will shrug off bad news, while a weak one will obey it.  A weak market will shrug off good news, while strong one will just continue on.”  This market was rather weak to start off with.  Many were looking for any hint of bad news in earnings reports to sell.  NetFlix and a few Tech stocks dropped significantly on just poor or “grayish” news.  Not much of an excuse was needed.

Many of my protective price levels were hit this week, and I’ve done a fair amount of selling to protect profits.  IF the upward market resumes, we may see a rotation in leadership.  I’ve said in past posts to “dance near the door”, now I’m half way out of it. 

Next week may answer the question: “Breakout or Shakeout ?”.  Eyes wide open in here.  Have a good week.

(Comments to my postings are Welcome, just click the “Add Comment” section in the upper left of this post.  Cheers !)

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