Friday, April 4, 2008

State of the Market - 4/3/08

We had a somewhat volatile session today in the markets, but in terms of helping this market find some direction, very little was accomplished. With a poor jobs number giving the market every reason to sell off after two lackluster sessions Wednesday and Thursday, it didn’t and that is good news. But there was still no momentum to be found to the upside as well, as the indexes once again could not hold onto their intraday gains. The day started off with selling, which accelerated for the first hour and things looked to me like we were headed for a very tough day. However, things stabilized and bounced strongly through the lunch hour and until around 2:00. After that, the indexes sold off into the close, with a very late bounce leaving them with very small gains for the session. Volume was pathetically low - from what I can see, it was the lowest volume of the year so far. (Correction - IBD was having technical issues on their charts so I don't know what the exact volume figures are, but they were low overall.)

With the jobs number coming out, I really expected we would get a big move one way or the other, especially with the last two days being relatively calm. We didn’t though and things still aren’t very clear from a trading perspective. If you remove Tuesday’s trading from the mix, the last six or seven trading sessions have been among the most boring I can remember in a long time. One thing that is very clear is that the market does not really care at all about the headlines right now. Bad news no longer causes selloffs. The biggest loss of jobs in five years and a rising unemployment rate is not a good thing, but traders don’t seem bothered. I don’t know why – maybe the reasons will show up eventually. Maybe everyone is just asleep and don’t even hear the news.

Overall, it wasn’t a great day and it wasn’t a terrible day. That seems to be the recent trend – just boring, listless trade. We still can’t get major follow-through but I do like that buyers came in and took the market off its morning lows. There are very few great stocks to buy, but then again there are also very few stocks that are falling apart. I guess it just depends on how you look at things – are you an optimist or a pessimist?. When you look at all things together, I think you basically have a market that is slightly bullish but has very little momentum either way and one that is still not safe for making large bets upon.

Stocks moving today included the agriculture, energy, and solar sectors. These sectors do show good fundamentals and strong growth but when I look at their charts, I just see so many problems. Solars were beaten down tremendously to start the year and because of this, have formed bases way too deep to be proper. The best I have seen is FSLR, which up to today has lacked accumulation, and CSIQ, which has been choppy. For the ags, look at any of these stocks – MON, POT, CF, MOS – they all look technically poor in my opinion. I see lots of reversals and tails, lots of down volume, not a lot of up volume, and just general choppiness throughout. Many energy stocks have some nice patterns, but lack some accumulation, and others just look nasty to me. Because of this, I am not looking to go long in any of these names except perhaps the solars if they tighten up a bit – it may be a mistake, but I have to trust what I see. If the solars rest for a bit on lower volume, there are a few I would be interested. The energy and ags – sorry, but no.

That’s the only real problem I have right now with the market – I am just not finding anything that I really want to buy. I would love for this rally to take off and be the start of a much bigger move higher. I would love to have positions in more longs. Unfortunately, I can’t. Nothing I see gets me very excited. I also don’t want to force anything right now. I’ve gone through all of my scans, I have been staring at my quote screen, hoping something will pop out to me, but nothing changes. Because of this, I am just waiting for a better opportunity. That is probably still the best way to play things right now, as hard as this is.

I finally did have some luck with a long trade as WSCI came out with nice earnings last night. I say luck because I had no way of knowing that they would be releasing these last night – if I did know, I probably wouldn’t have entered yesterday. Many of these small, low-float companies do not announce when they will release and therefore it is often a surprise, which can be good if earnings are solid or bad if earnings are poor. I liked the action today in the stock and I will look to possibly add some if it pulls back to the 9 day moving average, assuming the overall market shows it wants to continue upward.

Hopefully we get some sort of trend going next week. We are near resistance as I pointed out yesterday, so perhaps we are just resting here before busting through those levels on strong volume to really jumpstart this rally. I sure hope so. Good luck.

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