Without having posted anything for awhile, there is some catching up to do.

First, the year end rally at the end of 2007 did not materialize which led me to exit the long side on the last trading day of 07. I felt that the weakness during that very strong seasonal period was a warning of things to come. There are times when you have to make judgements regardless of what your systems are telling you.

As we are now in free fall, with the commercials heavily short, and in a seasonal down time period, is there any reason to look at buying this dip? As I type this the globex S&P session is down a staggering 52 points during this holiday. Whether or not this is a buy is up to an individuals trading or investing view. As an investor, stocks are clearly on sale here being undervalued by a number of measures, in particular, vs bond yields. It is at these times that you simply must put money to work, but also not to expect immediate gains. Investing and trading are two different approaches. As I have stated all along, the end of the first quarter is where I was looking for a low to be formed, so we are a ways from that as traders but not as investors.

From a short term trading perspective, the market is severely oversold and these types of declines have to be bought into, but timing them is difficult. First, your stops need to be much wider than normal to adjust to the volatility, and second, your size needs to be smaller for the same reason. I do not look to make a killing during these periods because that is how you get blown out. I want my risk to be the same during all market periods for consistency. That means trading smaller size with wider stops.

If the market does gap down to the degree that globex is indicating on Tuesdays action, that is an opening so extreme that it is a buy in my view for a short term trade. It is completely counter trend, but it would represent a several standard deviation move, that statistically is probable to reverse. However, overall I think we will trade down for the next week or two, then find a meaningful short term low, work into a more significant one in March, then head upward into the end of summer.