Thoughts on Current Down Trend

Looking at the past index charts, the current down trend that we are experiencing is nothing spectacular and not something that is out of the ordinary. It reminds me of the July decline that we experienced months ago. Now is a good time to either hang tight or sit on the side with cash. Most likely, short positions will not follow through, so do not waste your time as of yet. Short term traders may have been able to grab some profits by shorting early on the temporary top and anyone who shorted the futures probably made a respectable gain, yet I still remain stubbornly bullish. I may be wrong, but I believe that we are just taking a short break before we're set for the next leg up. I will be constantly looking for strong moves in stocks that can lead to longer term trades (ala KIRK, KS, DTG, F, etc). I would pay extra attention to SPU as it has set itself up like HPJ did months ago.

note: also, HDSN has potential...

The first step is to look for support levels. The 10K level on the DJIA seems like a good place to start. So step one is to sit on the sidelines in cash and watch for a support level to form. While doing this, monitor stocks that are breaking out, making new highs or showing strength on high volume. Look for a brief period of consolidation. Even if market bounces from this level, just watch. You will want the market to post a follow through. In addition, you will want to see stocks making strong breakouts as well. I have seen markets bounce but no real follow through in individual stocks. That would be considered a warning sign that the market is not ready to climb back up.