All That Glitters Is Gold

Just when you thought it was safe to go back in the water, they hit the markets again. After a rapid morning rally that took out Tuesday morning's high, the markets succumbed to selling pressure. The afternoon release of the Fed Beige Book brought additional selling pressure to all indexes. Nothing was left unscathed -- the Semiconductors, Transports, Utilities, Cyclicals, Biotechs -- you name it, they sold them. The Gold index was the only gainer with a whopping .70 increase on the day.

That being said, the markets have now sold off for four or more days. Being short here is dangerous, as a countertrend relief rally could begin at any time. At the time of this writing, the Initial Unemployment Claims number has been released and after a brief selloff on the news, the futures are coming back up to nearly unchanged. Overnight, the Nikkei traded down more than 400. There's not much impetus for the markets to move up here, but establishing new shorts here, with most charts buried in oversold levels, is not low risk. I'm not recommending the long side by any means, given the very bearish action seen in trading over the past few sessions. If you're already short, hang on with tight stops and see what the trade brings you. The only scenario that would make me establish new shorts would be a break of Wednesday's lows after a brief rally. Like yesterday, this would show me that the bulls have no strength and serious selling pressure could hit the markets again.

Below are a few charts with notes shown on each.

In this environment of low volume and whipsaw action, experience tells me to play lightly and cautiously. Everyone -- from daytraders to floor traders to hedge fund managers -- is nervous right now. Nervous traders cause erratic markets. A break of yesterday's lows could lead to some serious capitulation selling that could take us straight back to July's lows. Inexperienced traders are getting destroyed in these markets. Never enter a play unless you know exactly why you're doing it, what your targets are and what your exit strategy is if the trade goes against you. As always, good luck trading!

Carolyn