Thursday, September 25, 2008

State of the Market - 9/25/08

A big day today on Wall Street, as traders pushed stocks much higher for the first hour of trading, and they continue to move higher throughout most of the day. Stocks pulled back around 2:00, but held lateral support and rose slightly back up into the final hour. The final hour wasn't kind however to stocks, as they did break intraday support and finished well off their highs for the day. Optimism about a possible bailout being agreed to appeared to be the main reason for the move higher.

Technically, I thought this was going to count as an IBD follow-through day, but the late swoon nixed that notion, at least in my opinion. The S&P may finish over the minimum 1.7% threshold, but the way the market closed was certainly not impressive and is what you want to see on a FTD. You want to see a huge up day with tons of volume, showing that people are rushing back into the market. Today doesn't meet that description in my opinion.

If IBD does say we followed-through, I would still not classify this as the best follow-through day I have ever seen. The main problem(besides the way we closed) I have with it is that there just aren't any really, really nice charts out there, showing a great lack of leadership in this market. IBD pointed out in their intraday summaries that there were very few high-volume gainers today, and studies do show that follow-through days that occur without many new leaders breaking out typically turn out to be disappointing.

I made one small move today, buying UYG @ $19.83 based on its intraday chart and because I thought we were getting the FTD. It did move higher from there, but reversed and I was stopped out at $19.63 about an hour later for a loss of less than 1%. No big deal - I am definitely not giving positions room to run right now because anything can happen

I didn't see anything else that interested me so I didn't do anything else today, and perhaps that is for the best. The news still scares me as well so from my perspective it pays to be cautious. I don't mind dipping my toes in to see if the water is OK right here, but that is all I am doing - testing the waters. This is still not a time to make big bets on anything. There are all sorts of things lurking out there that can turn those big bets into big losses very quickly, and the problem is is that you just don't know when those things will pop up and bite you.

Overall, even though we moved higher today, the close was very weak and I still don't get the sense that things have changed that much. We are still in a very news-driven environment. It would not surprise me to see a little bit more of a rally if the bailout gets passed and that bit of news is behind us, but that doesn't mean we have hit "the bottom". If there were more charts out there, I would be more optimistic here. As it is, I still have to be somewhat tentative and probably will remain mostly in cash until I see a lot of quality charts making quality moves. It's still tough out there - be careful.



Avatar said...

Its all about the Federal Reserve System.

jmark said...

Sallie Krawcheck, the head of Citigroup wealth management unit, will step down from the company. This is a major news for the banking sector.