There are a slew of rumors flowing out of Europe and that is helping to give us a little oversold bounce in the early going. Breadth has turned positive and we have regional banks, retailers and chips leading while precious metals are the big laggards again.
If you are playing for an oversold bounce here like I am, the key is to remain skeptical and not be shy about locking in gains when you have them. Whatever you do, don't let a profit turn into a loss.
Most of the best traders I know err on the side of taking profits too quickly. That is particularly important when countertrend trading. It can be frustrating in this market, which has tended to overshoot on the upside once it starts to run. But the big picture is so gloomy that overhead resistance is likely to be more severe.
My game plan is to avoid the bottom calling and try to catch a few quick bounces. The rumors out of Europe are going to make it tough for the bears today, but the potential for more downside next week is extremely high, especially if there isn't some major move by the G20 this weekend.
I have a number of stocks on my shopping list, but they aren't doing anything to make me hurry up and buy. I want to buy them when they are going up and I prefer to buy them higher rather than lower.
Keep your guard up. This market is far from being out of the woods.