Friday, May 9, 2008

State of the Market - 5/9/08

More record high oil prices and a poor earnings report from AIG caused a rough open for the stock market today. Lows were quickly put in after the start of the session, however, and stocks did try to rally higher a bit up until around 11:00. Stocks couldn't get a whole lot of momentum though, and traded back down into a range they stayed in through the lunch hour. Stocks stayed in this range for the rest of the afternoon - the S&P had a spread of 5 total points from 11:30 to 3:30. Around that time, both the Nasdaq and S&P tried to break out of their intraday ranges, but quickly fell right back into them, and the indices closed with marginal losses. What started out looking like a day that could have some fireworks turned into a very boring one. Volume was very low, so today is not a distribution day.

Technically, the bulls were able to hold the S&P and Dow right above the support levels I have mentioned for the past three days, as if they knew they needed to defend those levels or things would get much worse for them. Right now, this looks like a pretty calm pullback for the indexes. Back in October, 2007, the down days came with higher volume, and that is the clue the market gave that it was headed much lower. Right now, it's not giving much of any clue. This whole rally was on very low volume, but now this pullback has been on low volume for the most part as well. The big boys certainly aren't trading, in fact, it doesn't seem like much of anyone is trading. I hate to think what the summer months are going to look like if volume is so low right now, regardless of if we are going up or heading down.

Both of my positions did very little today. LEH looked like it might break lower when the day started, but buyers came in and gave it small gains. It is still below the 50 day moving average and as long as it stays below, I will hold it. Right now, though, it looks like it doesn't want to do much of anything. OFI had a nice day but finished off of its highs in the last ten minutes of the day. I will move up my stop to break even and see what happens. Volume was good so perhaps it has a chance to move higher still.

I don't have much else to say tonight because this market is not worth saying much about. It continues to make things difficult for both longs and shorts, and I had absolutely no desire to make any moves today. The market is still holding short-term support levels, and until it breaks these, or we get more higher-volume selling, it is hard to get very bearish. On the other hand, since March 20, we have had exactly zero days of higher prices and volume higher than the 50 day moving average on the S&P, and exactly two of the same days on the Nasdaq. The big boys are not playing this market at all right now and until they do, how much higher can we really go? Sentiment indicators are also getting very bearish in that the percentage of bulls in both the AAII and Investors Intelligence surveys are quite high all of a sudden. Hope that clears things up for you, right?

The Eastern Conference finals for the NHL start tonight, so I am going to stop wasting time thinking about this market for the rest of the night and get ready for the game. I'll be back at some point Saturday or Sunday with some charts and commentary. Enjoy the weekend.

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