Play Editor's note: Wow! 2008 is off to an amazing start. I think it is the 3rd worst start for a year in the stock market's history. There seems to be a unanimous decision that we have not seen the bottom yet. Yes, it looks bad but investors haven't capitulated just yet. There is a lot of focus on the volatility index (VIX). Most are looking for the VIX to spike into the 30-31 zone as a sign the selling has run its course. While this is a great signal to watch there is nothing to stop the VIX from shooting past 31 to something much higher. On the positive side some of the signals I watch are suggesting we are definitely very close to a short-term bottom. So how do we trade this? Naturally just about everything is bearish and looks like it's heading lower. However, adding new bearish positions now after a three-day sell-off would seem foolish. The DJIA has lost 620 points (4.8%), the S&P 500 lost 83 points (5.8%) and the NASDAQ Composite has lost 132 points (5.3%). I tried looking for stocks were we could try and target a dip near support but nothing really screamed at me. We'll have to wait and see what happens tomorrow - of course it is an options expiration Friday so it could definitely be another volatile session.
FYI: A few stocks I am watching...HSIC looks like a buy over $64.00. Shares of MO might be a bullish candidate on a dip near its rising 50-dma. HON will probably bounce near the bottom of its trading channel near $53.00. I am also watching AAPL for a dip near $150.