New month, new quarter, same market. No wild swings, but very choppy action. The Dow and S&P 500 gapped down at the open but spent the rest of the day clawing higher, basically closing flat. The NASDAQ chopped all day and is struggling.
All eyes are on Washington, waiting for news on the $700 billion bailout to rescue the economy. The Senate delivered this evening by approving a modified plan. The House will vote on it soon. The market will likely react with a gap up or down, which will make entries difficult. As I am writing this, the Asian markets are trading lower on the news. That could change of course, and we still could gap up tomorrow, but we could easily gap lower as well. This market is just too volatile.
A bullish case can be supported by the VIX, or the Volatility Index, which is now in the 40’s. Usually a raly can be expected when the VIX is in the 30’s, and at these prices, the VIX could be signaling a power move higher in the market.
If the market gaps, it may be difficult to get positioned. I will be watching these stocks for entries, but if they gap significantly higher, I will avoid these, and I am only looking for day trades. Holding overnight is a gamble in this market.
Good luck and good trading!
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