The market is still in a very dangerous environment now, an environment we call "whipsaw," where it whips back and forth. All indexes are still in this range, a few up days followed by a big volume down day. Today, by far, was the biggest volume down day of this year, mostly attributed to news of Chinese banks tightening restrictions for lending. I cannot lie and said I bought into this move today, as I was already cautious 3 days before. And when you do not understand what the market is doing, it is best to step away from it and watch. Once again, I do not see many buy set ups and I see several juicy short set ups (namely FSLR and RIMM). But until this follow-through day, which I discussed a few posts before, comes to fruition, I will be watching from the sidelines, waiting for my opportunity.
However, if the market does break out through this range to the upside, I will be watching a small stock named CREE. It's main products are LED lights and has significant exposure to Asia to capture the infrastructure boom. It came out with earnings early today and busted out to new highs, opening at all time highs. Relative strength and weakness of stocks in the market is a powerful, predicative tool in the market because it an obvious sign of which companies institutions are putting or pulling their money out of. More importantly, on such a weak day in the market as today, a strong move is even more eye-popping.
