Wednesday, July 30, 2008

State of the Market - 7/30/08

After a big follow-through day yesterday for the market, stocks followed-through on the follow-through day early on in today's session. Buoyed by a better-than-expected jobs report, stocks opened higher and did nothing but rise from there, hitting their highs around 10:30. It was at this time when the oil inventory numbers for the week came out, which caused a spike in oil, which caused stocks to start a meaningful pullback into the lunch hour. The selling wasn't sharp, but the Nasdaq did break below intraday support around 12:10 and the selling pressure increased a bit at that point. The bleeding stopped a little after 1:00, as the Nasdaq got some support around the 2305 yesterday that acted as support yesterday as well and bounced. But when oil rose to new highs for the day, the bounce failed, and stocks broke to new lows. That didn't last, however, as stocks impressively rallied back up even in the face of rising oil. I am putting this out a little early today, so I don't know we will close, but I do think it is good to see the market hold up decently in the face of a big spike in crude.

Technically, the Nasdaq got somewhat close to that 2350 level before reversing rather hard in a bearish fashion. Likewise for the S&P and Dow, although they didn't get as close to resistance levels as the Nasdaq did. They did finish off their lows which is nice for the bulls to see. The story however remains the same - choppiness is the name of the game right now, and taking any positions for more than even a few hours is difficult at best.

I didn't do a whole lot today - I was a little hesitant to buy anything with the market up so much in the morning, and I really didn't see much that looked perfect to me anyway. I did take a very small position in BWLD last night @ $35.02 to see if it would work as an earnings play, and early this morning, it did look good. It faded, however, after the morning gap and I was stopped out @ $34.29 for a 2.2% on a small position. I also took a position in SKF today at $119.03 as I just didn't trust the early action and it already had reversed off its lows. I was stopped out of this at$122.62 for a 2.8% gain. I was surprised the financials were not down more with oil being up so much.

As oil popped, I tried a smaller position in PDO at $12.04, just thinking it may run if oil continues to bounce. I had no intention of holding this for more than a day or so, hoping to catch a quick move. I set a trailing stop and that was hit at $12.54, which was good for a 4% gain. Not much but I did make some money today.

I really don't like day-trading - I would much rather hold positions for several weeks or months, but right now, this market is making that impossible. It is almost forcing people to be very short-term traders. I really don't know how you can be successful doing anything else in the current market environment. Hopefully we can get into a better trend soon.

I am leaving early today for a family engagement and I don't know when I will get back, so I may not have charts up tonight either. I don't know if it matters - as long as the action continues like it is right now, there is no point in doing a whole lot in this market. I may take a few daytrades like today if I see them, but don't plan on taking any big positions until things clear up.

Oil continues to have a stranglehold on the market, and if it continues to bounce (which is possible - I could see the USO getting up to around $106) then this market will likely continue to be range-bound at best. Ideally, I would like to see things slow down for a few days - maybe have a day or two where the intraday range is less than 50 points on the Nasdaq. If we get that, more bases could set up, the market could work off its slight overbought condition, and perhaps we can setup to move higher in a smoother manner. As of now, I still don't see a ton of great charts, and the action seems to indicate more rough trading for the near future. I currently have a slightly bullish bias, but I don't think the sailing upward will be very smooth, so being careful remains important here. Bottom line - I still don't think we are in a situation where really big money can be made. Best of luck Thursday.


Anonymous said...

I'm keeping an eye on the solars. They did pretty well after the last low in March, and it looks like some of them are breaking out of their channels. But I'm sitting tight until confirmation and clarity.

Anonymous said...

I should add, FSLR beat estimates today in after market.

Mac said...

I would agree - I was watching SOL and CSIQ today as they both have similar falling wedge patterns that they looked poised to breakout of today. That didn't happen, and they both closed poorly, but I will still watch. They could run a bit on a good breakout. FSLR could help as well.