Monday, November 12, 2007

On My Mind: Ideas to Start the Market Week

* Tracking Weakness and Opportunity - As I mention in my weekly market summary, I'm looking at the market's ability to hold the August lows as a key test. We can see a range in the Russell 2000 Index going all the way back to early 2007; also for the S&P 500 Index (SPY). We're either at or approaching key levels in those indexes, which may tell us a great deal as to whether this is another correction a la March and August or the start of a true bear market. Note the wise words of caution from Charles Kirk.

We're hearing concerns about the dividends for the financial stocks; that is hurting high yield ETFs such as PEY. That also can't be good for fundamental market valuations. Note also that we've breached August lows in the Semiconductor Index ($SOX) and the S&P Consumer Discretionary stocks (XLY). The weakness is not just limited to financials and homebuilders, and indeed recently has spread to those outperforming sectors: large cap technology and China. One possible tell: will institutions step up to the plate and start buying those bank stocks, perceiving value--more opportunity than risk--in the beaten up area? We saw a little such interest late in the week. Let's see if that was the start of a theme or mere short covering among the long/short participants.

* Hot Blogs - Excellent listings of sites worth visiting from Chris Perruna. See also Chris' perspectives on corrections, bear markets, and the market's big picture.

* Lessons From Market Wizards - Keen insights; The Big Picture outlines what we can learn from the Wizards in Schwager's series. See also the week in preview, including a link to why our brains are wired for optimism.

* Options for the Fed - Very interesting perspectives on how the Fed could respond to the current credit challenges, further unwinding of quant trades, and other market/economy links from Abnormal Returns.

* Historical Patterns and Trading System Ideas - Check out Jeff Pietsch's blog and his recent posts. He finds favorable returns after big NASDAQ drops and outlines a sentiment trading system.