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Just a quick update for you. Today the market showed some true nastiness as all three major indexes dropped over 2% and finished on the lows of the day. As I said before, today’s action was crucial because it identified what was contained in the massive volume we saw last Friday.

Personally, I expect us to see stocks continue to slide, especially after today appeared to be massive selling as well.

Now is a great time to cash out on your longs and start to pick up some shorts.

On Friday, I saw what I wanted to see in the markets: massive loads of volume. What difference does volume make? It is the fuel of the market, and without it the market cannot make any serious moves of consequence.

So, now that we have seen ultrahigh volume, the plan is to watch what happens on Monday. With enormous volume and stocks finishing in the middle of a tight range, Monday’s action will tell us whether there was supply or demand in the volume. Also, Monday should give us a view on the next direction of the markets.

Here is a chart of the Dow illustrating all these points:

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“If you don’t read the newspaper you are uninformed, if you do read the newspaper you are misinformed.” -Mark Twain

These days it truly is a chaotic environment for the personal investor. First, we are told the world is crashing in October ‘08 as the markets fall over 42%, then we go on a huge 40% rally as we are told that indicators are pointing to the economy rebounding. How can anyone invest in the right direction with all this volatility?

Well, for starters, try turning off the television that we all know you are watching. I’m guilty too, don’t worry. I used to watch CNBC (I never got Fox Business) for information regarding the markets.

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Here is some VSA on PALM that shows selling into the up-trend on multiple occasions. Comment with any questions.