Stock Market Commentary - Correction Has Begun

U.S. stocks posted a follow through day to the downside yesterday, effectively ending the rally that began late last summer. In order to offset this price action, a huge upside day will be required. What could be the catalyst for that? A big number in this week's employment report. This morning, the ADP gives the first glimpse at Friday's employment report, but it has not been a very reliable indicator of the government number in recent months.

If the number is over 300,000 new jobs on Friday, I suspect there could be a spike. At the same time, that may also indicate that the Fed must stop QE2 sooner rather than later, which would spook the market. A perfect number might be in the 150K to 200K range.

Stay tuned!

Scott Cole
www.bestdaytradingstocks.com

Stock Market Commentary

Yesterday was a true selling day for the market, with all of the averages down at least 1.5%. The reasons for the decline are of no matter. It is simply a warning shot that the market is due for a correction. I found it interesting that the futures pointed to a rebound early this morning, but slowly declined into the open, and now the market is down as I write this about 11 am. If there is follow through today, then yesterday's action suggests a correction is at hand. If another true selling day occurs within the next week, then the easier money will likely be made on the short side. For now, it is a good idea to consider both long and short trades when daytrading to hedge your bets.

Scott Cole
www.bestdaytradingstocks.com

Stock Market Commentary

Yesterday's trading action suggests a short term top may now be in place for the market. With the exception of the Dow Jones Industrials, all of the major averages were down at least 1%. Also, yesterday's close was below the previous four closes. When that occurs the day after a new high is made, odds are that a top is in place in the near term.

Daytraders should pay attention to a potential change in character for this market. While yesterday is just one trading day, if it's action is not reversed in the next few days, then the market is likely heading for a bit of a correction. As a result, the best opportunities will involve short positions or long positions within ETFs that short the market.

Scott Cole
www.bestdaytradingstocks.com

Weekly Stock Market Commentary

U.S. Stocks continued their march upward this week as the S&P 500 closed with a 1.1% gain on the week. Historically, as far as records have been kept, a 1% up move in the first week of the year has a 100% correlation to the market ending the year with a gain. This is according to CNBC. Of course, this is utterly worthless information. However, since this is also the third year in the presidential cycle, odds are in favor of a positive year as well.

In any event, all this suggests is that the current trend is up, and for daytraders, it makes most sense to stay on the side of the trend. I've seen over and over again in recent weeks how the market opens lower and closes higher than the open. Even if it is just a small gain or a small loss, the short sellers are getting grinded to death. At some point there will be a correction, however, at this point, it is not yet on the horizon.

One of the big trades on Friday was RBN. This is the kind of move that many daytraders miss. The stock gapped significantly at the open, and many daytraders simply like to fade this kind of gap. However, a more experienced trader would look at the daily chart and see a favorable set up for a big up move.

After the stock gapped higher, it moved significantly in the first five minutes. It is virtually impossible to try and scalp such a move. In fact, it would be foolish, because you would be leaving a lot on the table. Better daytraders and short term traders would look for a bigger move.

Based on our strategy, an entry point would have been somewhere just under $40. The stock closed at $41.18. The chart is below

Scott Cole
www.bestdaytradingstocks.com