DO I FEEL LUCKY? WELL DO I?

So the Asian markets are selling off which is causing US futures to sell off. This indicates a low open tomorrow. I would caution against jumping into the short side of the trade tomorrow. While the markets may sell off early morning, I believe if there is no negative news concerning the subprime lenders and if the economic reports are not bad, we may actually see a bounce off the lows tomorrow causing a bear trap, at least for tomorrow.

One might say, "but look, Asians are selling off, and our futures look horrible!". Although I agree, sometimes futures and Asian markets have little correlation to the US markets. Why do I say that even though I have been so bearish over the past few weeks? Shouldn't I embrace the encouraging data for the shorts? Well, I would like to remind everyone about volatility. It is nobody's friend. If history has taught me anything, it is easier to take the contrarian position at the extreme points rather than going with the flow during the massive sell offs. One thing is clear. This market is dangerous for even the most seasoned traders. I still think that it would be wisest to sit in cash and wait this storm out. I do not know how this will play out but already, the message boards and news media alike are harping on the impending downturn that will rival 1987 and all of the other worst stock market crashes that preceded us before. The other thing is that it is very rare for the US market to follow Asian markets as it has been the past few weeks. Additionally, I must admit is that the majority of Asian markets are selling off on fears of US markets. It's funny, I thought it was the other way around. So the game goes on.

One interesting thing I did notice few days ago is that gold is also selling off. In times of uncertainty, traders and investors alike flock to either bonds or gold. But gold is selling off! To me that is a negative divergence, which usually state that gold should rally in perceived weak economic environments and decline in periods of economic prosperity. Gold was down $42 last week. I thought based on the gloom and doom that is ahead, we should see gold close to $700, not at $640's. What gives? This is a troubling divergence for me. I will continue to monitor this, but if gold continues to churn or go lower on sell offs, that would mean that the market is not convinced about this recent sell off, and it may just end up being a correction.

So what gives? Do I feel lucky? Do I? Well I don't know. I did get whipsawed a few times last week. I am not sure what the market holds for us tomorrow or even today. As the market is getting ready to open low tomorrow, I see the chances of anything happening at 50/50. It is a crap shoot. I think I may have better odds in Vegas. I think that the payoffs can be huge by playing the game during recent volatility, but the down side can be harrowing. I may just sit tight and wait this one out, at least for tomorrow. If the maket starts to show some life, I may take a long position in CME or RIMM which seems to have not broken down as much as say Google. I think that Google can show a strong bounce if the sell off loses steam tomorrow.

If I was to short tomorrow:
-BIDU
-LHGC
-SHLD
-RIMM
-CME
-GOOG
-AAPL

If the market shows strength go long:
-GOOG
-LHGC
-CME
-RIMM

Stay safe!