Jeffry: Thanks for your explanation of the market a little while ago. It definitely clarified somethings for me.
So, today (11/14/97) IBD writes about how 11/13 was a followthrough day, 1% up on higher volume. A weak rally because it happened on the 16th day since blue monday. What does that mean? We can think about getting back into stocks but not actually do so? <g>
Actually, I want to disagree with IBD's assessment, so please correct me if I'm wrong. As I see it, the markets fell a lot on 11/12, and rebounded on 11/13. True, it wasn't a crash or even a correction on 11/12, but we basically tested the lows between 11/12 and 11/13 on the NASDAQ Composite (not counting the actual lowest point we hit during the fake correction which was lower than what it might have been had the markets not closed in the middle of trading). We rebounded on 11/13 from the fall on 11/12, just like we did after blue monday. Shouldn't we be looking for another followthrough day within the next 3-11 days from 11/12 before we call this a rally?
I'm still not confident about the market. All the stocks I ever thought about shorting are falling these days; in fact, even shorts I actually lost money on a couple of months ago are below the prices I shorted them at.
I really really have to pay attention to the market direction before I ever short a losing stock again. And use put options. It makes very little sense to use margin when you can get more leverage with options. I also start to panic when the stock stops having downticks right after I short it (this is a rule, I short a stock, it goes up; I close my position and it falls and falls - you could pay me for this: I'll short a small position and you go long with a large one and we split the profits!). With options I would go in with a known risk, willing to lose it all - this might actually help me to hold on to my shorts a little longer through some upticks.
Thanks,
-Atin |
