Weekly Forecast 2/23/2009

Last Week's Trades-

We closed off 4 trades this week with options expiration. Morgan Stanley (MS) and the Nasdaq ETF (QQQQ) both expired worthless and we took full credit on those. Goldman Sachs (GS) we got stopped out at break even and Toll Brothers (TOL) we got out with a small profit, entering at $2.80 and exiting at $3.30. With three winning trades and one break even trade this brings our accounts up by 4.5% for the month.

We also entered a new trade with the June $12.50 puts on Fossil watches (FOSL).



Market Trend
Well we finally got the bearishness that we've been predicting for the last couple of weeks and it hit pretty hard. We are now in oversold territory, but that still doesn't mean we want to be buyers yet. The market is likely to go down further as we fall toward the November 2008 lows of 737 on the S&P. If we breach this support level then it is look out below. We are still holding down from the 852 level on the weekly chart from the sell signal that we got on January 14th. We also still have a sell signal on the daily chart from the 836 level so the trend is still down.



Commercial Traders

The commercials are still net short and little has changed in their positions. We are likely to hit the November lows over the next few weeks once we get out of this oversold condition.

Seasonal Tendencies

Seasonally there is nothing special about this week, but typically March shows early and mid-month strength.

Forecast

We are into oversold territory, but that does not mean that we can't still go further down from here. The ADX directional indicator is at 27, which means that we have a fairly strong trend that may ignore the oscillators. We may move sideway or even higher for a bit, before we drop or we may just continue to drop from here. Whatever the case we do not want to be long the market right now.

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