Overview Thursday 9 July...

We saw a continuation of the oversold bounce that really started yesterday afternoon. However, the vibe I'm getting is the long-side traders are more inclined to take profits very quickly than they were in March to June. In that earlier timeframe, the longs were stepping in and buying any pullback to drive prices higher, but this month, those longs are standing aside and letting prices fall. I'm seeing a lot of stocks that sold off hard over the past week, but have rallied a little over the past couple days and are approaching former support levels (which will likely now become resistance).

Tomorrow is Friday, and it's a July Friday. Summertime action in the stock market tends to be slower because it's vacation season. I generally tend not to make a lot of big moves on Fridays, particularly during the summer. The action tends to really thin, particularly in the afternoon. Plus, there's all kinds of headline shock potential over the weekend, and it's a dreadful feeling to be caught leaning the wrong way over the weekend if there is news.

Short-term bias: bullish (I think the oversold rally has a bit more juice, but not too much more)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

Well, I was right about BNI, FCX, and DFS in that they had a bit more room to the upside. I still like all three as shorts, and I believe BNI and FCX still have some more upside in the short term. I do not feel the same about DFS. I put in a buy order for some DFS puts (August $12.50), but it did not fill. DFS's options chain is a bit thin for my liking, but it's liquid enough. I may cancel this order and look to short the common stock.

Now, how about AIG? Down 60% this month. Yes. Sixty. I thought it would fill that gap-up created back in March, but I didn't think it would happen today. As such, I believe AIG is pretty much done on the downside. If you haven't covered shorts in AIG, I highly recommend you do so. I considered a daytrade long in AIG this morning once it started to stabilize just over $10 (with a stop just under $10), but decided against it. This is an example of an oversold stock becoming even more oversold.

As of today's close, I am removing AIG from the watchlist. One might try to play it for an oversold bounce on the long side, or we might revisit it later, but for now, it's off the watchlist.

Position: long $SPX index fund in 401k