Tuesday, February 07, 2006

Closing Near the Lows

As I suspected based on the recent action of former market leaders, stocks continued to selloff today. The market was down pretty much all day, led by energy stocks. Oil prices fell sharply, which caused nearly all commodity-related issues to come under pressure.

Volume increased from yesterday's levels, qualifying as a distribution day. Breadth was negative, while the Hi/Lo index is still positive. The put/call ratio rose to 0.94, so we are starting to see fear creep into the market.

Calling a market bottom is difficult at this point. My thinking is that most likely we will get a bounce, then come back down and retest, and that could create a more durable bottom. The SPX is only 3% off its high, and hasn't spent all that many weeks correcting. So be patient. But I am beginning to see some attractive opportunities developing, including the energy complex.

Have a great night--

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