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Markets Continue Correction

Dec 01 2008

I was considering looking for some good long stocks with the recent week of gains but this morning’s manufacturing report of 36.2 versus the expected 38.4 has the markets falling sharply close to mid-day.

Watch for a Buy Signal

Before making a stock investment in this environment, I am watching for a buy signal on the three major averages, the NASDAQ, the Dow Jones Industrial Average, and the S&P 500. If the NASDAQ can break above it’s most recent high near 1765 that will be a good sign. Additionally, the Dow above 9580 and the S&P 500 above 1000 are all positive signs that a rally is underway.

Be Cautious of another Sell Signal

But the markets could just as easily break below their recent lows and make a further corrective move before the end of the year. The NASDAQ below 1285, the Dow below 7440 and the S&P 500 below 730 would signal the continuation of the bear correction.

The Trade

Remain cautious and on the sidelines as much as possible until there is a clear signal/breakout to the upside or the downside.

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