Chicken Little Says in the Chicken Coup

Wednesday was essentially the mirror image of what we had on Tuesday, markets gapped lower across the board on worries of inflation, highlighted by the oil closing above $100 and various other commodities breaking to new all time highs. By the end of the day though, the market had shrugged off the bad news and moved higher. The Dow closed up 90 points to 12,427.26, while the Nasdaq gained about 21 points, closing at 2327.10. Volume was higher on both exchanges, particularly so on the Nasdaq, where it surged 18% from the prior days level. Advancing issues led declining ones by 21 to 13 on the Big Board, while they led 17 to 13 on the Nasdaq.
Given the higher volume totals on the exchanges, and particularly the fact that the market rallied inspite strongly off its lows in spite of bad news traders could take this as a positive sign and start looking for leadership issues to get involved with. They are pretty easy to find and summed by this way: Commodities, Commodities, Commodities! I myself am watching Natural Gas (ETF: UNG) for a pullback to offfer a small buying opportunity. For the most part, however, I've been very cautious thus far in 2008 and will remain so. At this point I am 90% in cash, but willing to put some of it to work if the right opportunity presents itself.
This type of market can be very frustrating for traders and investors, back and forth, back and forth. Up one day and then down equally the next, then up slightly the next etc, etc and on it goes. This type of whipsawing action can quickly take capital if you do not have sound money and risk management principles in place. (I will put up an article on risk and money management this weekend, If I can figure out how to do a podcast I will also do that). As difficult as this type of market can be, I really love it because it is during these harder times that a good trader/manager is able to shine. During a bull market anyone can and generally does make decent money, but during times like this I am able to show my clients exactly why they have trusted me with their money. Nothing fancy, just good old capital preservation, and when the good setups come available again we are there for them without the lost capital and confidence that many suffer.
I'm not going to give any setups today as I will not be able to follow them. I have a doctors apointment at the University of Iowa at 3, which means I will have to leave here around 11. I suspect that the appointment will take all day, so I'm probably just going to stay overnight with friends in Iowa City, which is where I went to college. I will likely be back late morning or early afternoon tomorrow.
If you have any questions or comments feel free to email me @ bfredrickson76@gmail.com