OptionSage submits:

“Today was the best day I’ve had since joining Phil’s Stock World. I want to thank Phil, Happy, Z, Sage, Dragon, Optrader and everyone here for being so helpful to me. You guys are GREAT!   Can’t wait for tomorrow.”  Greg

When the markets drop and we make a lot of money we know that others are not so fortunate and Phil tends to be somewhat embarrassed at proclaiming how well we’re doing in bearish markets since we often tend to be in the minority.  However, I am going to indulge in congratulating the group on another job well done with the Dow down 387 points, the NASDAQ down 56 points and the S&P 500 down 44 points.

We can’t say we didn’t forewarn that this might occur.  Just two days ago I commented:

“Temptation is indeed on its way and the market sure does feel like a lion’s den!”

1 – “IT IS NOT MY JOB TO SAVE THE MARKETS” – Phil Davis

2 – DO NOT TRY TO CATCH A FALLING KNIFE (meaning it’s dangerous to try to buy a stock that is falling because likelihood is it’s falling for a reason!

And Phil echoed the sentiments with:

“Don’t let a day’s move in the market’s guide your "investments."”

The NASDAQ corrected from a high of 2725 to a low of 2525, then retraced 50% to 2625 before today’s correction to 2,556 – the low of the day!  The DOW dropped from 14,000 to 13,200, then retraced 50% to 13,600 before being strong rejected also today, down almost 400 points!

THIS IS A BAD OMEN IF YOU ARE LONG THE MARKETS!

Fundamental analysts are obviously concerned about sub-prime woes.  Technical analysts have just seen a sharp correction off the 50% retracement level and no doubt the sentiment shifted even more bearish after today’s move.  Again it doesn’t mean that we won’t rise up in the next day or so but that one day move doesn’t mean you should buy into the thesis that we are starting a new uptrend!  The market will pop up during downtrends – if only to lull you into a feeling that it’s not that bad – and then it steals your money because you were not patient!

Speaking of patience, it is Whale Week on CNBC’s Fast Money – oh Phil you are missing much more than the market!  And today’s Whale was Warren Buffett.  Although initially I found it somewhat mundane to hear about Buffett – again – I am not sure any of us can ever be reminded too often that this is indeed a long-term game and has historically rewarded the bulls.  History has shocked investors holding long-term positions many times but has rewarded them in the end and no greater example of seeing how patience and astute investing has rewarded disciplined investors than Buffett himself.

Returning back to Greg for a moment, he commented today that he was in search of “stocks that will be the leaders after this correction.”  Let’s first note some stocks that didn’t hold up well (courtesy of Yahoo!) – always fun!

PRICE % LOSERS

Meanwhile some of the biggest gainers for the day are on the following list:

PRICE % GAINERS

Personally, I was impressed by the action of CSCO, EBAY, SBUX and even YHOO today.

One stock that is looking very cheap to me now is UNH:

“Goldman Sachs upgraded health insurer UnitedHealth Group, Inc. to neutral from sell to reflect current valuation and its expectation of improved profitability in commercial trends during the second half of 2007. The broker told clients it feels optimistic the insurer will begin to "turn the corner" on execution and customer service issues now that the most disruptive phase of its merger integration with PacifiCare Health are behind it”

It didn’t help the stock at all in the short-term but I suspect as a long-term play it will rebound nicely over the coming year. 

If I were starting any new bullish positions I would start VERY slowly with small capital contributions initially and scale in over time.  But frankly that’s very boring so I’ll be joining the rest of the gang in taking advantage of the volatility and engaging in some advanced option strategies that only our members get to learn about!

Trade Safely!

OptionSage