Daily Market Assessment

Beginning today, I will be making a daily pre-market assessment of direction and opportunity whenever I am in town. Sometimes it will be fairly long, but most of the time it will be only a few sentences.

Friday, March 16, was Triple Witching Day, with options expiring all over the place. One result was a big surge in volume, over 2 billion shares on both the NYSE and the NASDAQ. That much activity contributed somewhat to the very strong VIX indicator of volatility, which has jumped up into the 15-18 range since the end of 2006, where it had settled into a really low average of 12.80 for the year. The obvious cause of all this excitement (or fear, which is what the index truly measures) is the sudden collapse of stocks in late February. To put it succinctly, we're not out of the woods yet.

Summary: Long Term Market Direction is UP; Short Term Direction is DOWN. Hold Current Positions with very tight stops at 50-day support levels; do not go long on anything new. Look for short-term (2-3 month) bearish option trades.

The markets all fell on Friday and were down for the week. For the S&P500, which is the best measure of overall market performance, this was the third week in the past four that the index has fallen. It closed at 1387, which took it below its 10, 20, and 50 day moving averages (with a nice little mid-day "kiss goodbye" to the 10-day MA), and only has the 200-day MA at 1367 for support. If it drops through this level, it's Katy-Bar-The-Door, Lookout Below! This week the market will test this level; it's not a good time to be buying.

To confirm this, virtually all the industry sectors also are below their short-term support levels and falling. The only areas that seem resilient right now are Groceries, Drug stores (mostly due to the price action surrounding the bidding war for Caremark, which CVS appears to have "won"), and Utilities. After watching the market open, I will be looking at SHORTS and BEAR SPREADS only, especially on ETFs for Retail, Biotech and the Internet.