Today’s action was not as encouraging as we would have liked to see on a Monday following a challenging week. All major averages lost ground again today and every major sector was in the red except for a faint pulse in retailers which fizzled during the day. Semiconductors were particularly weak even though IBM caught an upgrade from Citigroup in the technology sector.  

We suspect that many investors don’t have enough cash on hand and are using any strength to lighten up which results in a slow grind as we head lower. It generally is a positive when there is a high level of negative sentiment but that is not so when folks find themselves trapped in positions and have not raised a comfortable level of cash. Negativity can result in a market bottom only when sufficient market players have acted on their pessimism and dumped their stocks.

On an encouraging note, we did see some small cap earnings winners bounce today, an indication investors are starting to wade through last week’s trash in search of good opportunities.  

We have nibbled a few longs today that look good despite the challenging environment. If you followed suite it is important to keep your time frames short; however, giving adequate room for these thinly traded stocks to move as they please.

TSP members should continue to sit tight. For those not accustomed to sitting out of the market, you must avoid the temptation to jump in too quickly. We have some earnings on tap this week, but the season won’t officially be in swing until next week. For now we must hold tight, be patient, and wait out a weak market.

RevShark