"The major indexes notched big gains Friday, but lighter volume and few bullish moves among top-rated stocks underscored the market's lack of committed buyers......Given the size of the market's gain, you'd expect a corresponding surge in trading volume. That didn't happen Friday. Nasdaq turnover eased 7% and NYSE volume 8% vs. Thursday's totals."
That is what makes me think Friday was nothing more than part of an oversold bounce. The action was impressive for the overall market, but not very impressive for individual stocks. I saw a few moves on leading stocks, but still don't see a ton setting up besides the oils. Two of my favorite stocks on the long side coming into this week, WIND and IXYS, couldn't move higher either Thursday or Friday and actually reversed after trying to breakout. That's not good.
The indices, as you can see below, did take out some resistance Friday, but both the S&P and Dow have more to overcome right above where they closed. In addition, the indices closed right at their short-term moving averages. Because of this, I would not be surprised to see the market turn right back lower from here, even with Friday's bounce. Frankly, nothing that the market might do would surprise here. My cynical side is kind of expecting another rally Monday after LEH releases what is likely to be a terrible earnings report. Does that make sense? No, but nothing does in this market. In case this bounce does have more to it, I put some secondary resistance levels on the charts as areas to watch for possible reversals.
NZ, ACOR, NTI, INXI
Speaking of the oils, here they are again. I am seeing a lot of short-term momentum patterns on these stocks (pennants, flags, etc.) that tell me that they are probably not done moving higher. Could they top here? Yeah, anything can happen. But from what I see, many of these are digesting their huge gains in the correct manner - I have not seen too many drastic reversals or pullbacks from stocks that were clearly extended that usually signify a top. If this action holds true, and these stocks do head higher, that is probably not going to be good news for the overall market. Oil prices still seem to dominate trading and the direction of the overall market day by day.
USO has been forming its own little pattern the past week and a half, so it could breakout soon as well. The only worry I would have in this sector is the politicians are able to pull some rabbit out of their hats and knock oil prices down, either by having OPEC agree to pump more oil or raising margin requirements or finally agreeing to allow drilling on our own soil - something like that. Perhaps I am giving the politicians much too much credit - all of those things would require action and common sense. My guess is it doesn't happen. This is the only place I am really considering putting money to work on the long side, even with the wacky market.
Here are some possible longer-term shorts, but to be honest, I don't love these. FSLR is just a hunch in terms of it running up to its 50 day moving average. PCLN would be low-risk here as the stop loss level is very close by. It needs to head lower Monday or I will likely be stopped out.
FSLR, PCLN, ISRG, EPIQ
If (and that's a big if) oil would somehow stop here and head lower, these four look like good short possibilities. I would not touch them however as long oil stays hot.
ATLS, DVN, APA, CRZO