Bad with the Good

Friday was a tough day. Both (SOL) and (SOHU) gave back their gains for the week, plus some. (SOL) opened the day extremely well, then tanked and closed below the 20 dma for the first time in weeks. (SOHU) had a larger percentage drop, but did stay above the 20 dma.

I could spend some time now covering the various big news items for the week, the jump in unemployment, the huge two day move in oil prices, and more; believe me, I thought about it. However, there's a reason I haven't posted in several days and for the same reason I won't talk about all these news stories.

I don't know diddly. I could not begin to claim that I know what is moving this market. It is confounding folks who've been watching it for years. It's driven Investor's Business Daily to make what I believe is a series of questionable - if not downright revisionist - calls on the current outlook of the market in the Big Picture column.

Setting aside the variety of news items and focusing on the price and volume action of the market itself, let's review last week:

Monday the market had a large percentage drop, but did so on lower volume. This is why we watch the volume. I drop of more than a percent can seem pretty serious, but the lower volume indicates institutional investors are not rushing for the exits.

Tuesday the market fell less, but did so on higher volume. It dipped low enough to kill the fledgling rally attempt for all indices but the Nasdaq. The S&P 500 closed below the 50 dma, a warning sign I've been watching for. It looked like the correction was really taking hold.

Wednesday the Nasdaq had a nice gain, but did so on lower volume. The S&P 500 closed just slightly down on higher volume, another day below the 50 dma.

Thursday the market surged up. The Nasdaq and S&P 500 were both up almost 2%, and the Nasdaq recovered it's 200 dma in dramatic fashion. There was only one problem - when the final numbers came in, they showed that trading volume on had dropped from the prior day as the market powered higher. This was not what I'd like to see when the market appeared to be resuming it's march upward.

Friday it didn't take long to see that Thursday's rally was indeed lacking strength. The market tanked early and losses steepened throughout the day. The major indices gave back every bit of Thursday's gains and more. However, just to keep things complicated - the Nasdaq's loss was on lower volume than Thursday.

What to make of it all? Sometimes the answer is so obvious it can be easily overlooked. If it's this had to figure out the market, that's really all the information I need. There is no clear uptrend, and there is no clear downtrend. I'm not buying stocks, and I'll continue to hold my current positions, unless and until the market gives me a clear signal to get out.

I've talked about this approach for several weeks, and I have to admit it's becoming increasingly more difficult to stick to as time goes by. It's especially difficult days like Friday when I take a big hit. However, that's not the time to sell - when I'm bruised and reacting to emotions like fear and doubt. Technically (SOL) and (SOHU) are still behaving well, so I will stay the course.

-Geoff