Wednesday, December 17, 2008

State of the Market - 12/17/08

After putting in a great session on news of another Fed rate cut yesterday, stocks opened lower to start the session today. Stocks gapped down, put in a quick bounce for about a half hour, and then fell to new lows. Those lows were quick, however, and stocks rose steadily throughout the rest of the morning and into the early afternoon with only a few light pullback. It was quite an impressive showing and around 1:45, the market actually broke above yesterday's highs for a short period of time. They met the resistance I pointed out yesterday, however, around 918 on the S&P and 1598 on the Nasdaq and quickly reversed lower from there. This pullback lasted until around 2:30 when stocks bounced back a bit into the final hour. That bounce looked like a bear flag though and it did try to break down from that, but really couldn't do so. The last forty minutes was pretty choppy, but the last five minutes was quite bad and left the market with moderate losses on what appears to be volume similar to yesterday.

Technically, the fact that we reversed almost exactly at the recent highs on the S&P and Nasdaq is certainly not bullish, but perhaps we just need a few days of rest before busting through those levels. Those are still the numbers(918 and 1602) I am watching carefully on the upside. Until the last five minutes, I really wasn't too concerned with the pullback we got midday. We'll have to see if the selling late carries over to tomorrow. I would watch 895 and 1560 as a first level of possible support and below that, we need around 883 and 1533 to hold respectively. If they don't, then things could get worse. For some reason, I just didn't like that late action.

I was able to check in with the market at lunch and was impressed with the bounceback, so I entered into NVDA at $9.22 as it broke above the resistance I pointed out in the video last night. Later on, my meeting got done early so I was able to check back in and decided to enter a few other positions based on their intraday charts - DRYS at $12.02, ACM at $30.87, and HIG at $18.48. Initially, these positions acted very well and as they did, I moved my stops up. However, when the reversal occured around 2:30, I was stopped out of the last three, all with small losses. DRYS was hit at $11.93 for a 1% loss. ACM was hit at $30.54 for a 1.3% loss. HIG was hit at $18.31 for a 1.1% loss. I was optimsitic that these would work but not optimistic enough to give them much room. My stop was not hit in NVDA and I still have that position. I actually did go back into DRYS later though at $12.37 as it broke out intraday near the end of the session. I didn't like the way either closed however so we'll also have to see what happens with these. I may get out after-hours.

Today was kind of a confusing day for me - I expected a nice breakout after stocks rallied the entire morning off the opening gap down, but then when we reversed around the recent highs, I expected a pretty big selloff. We got neither and right now, the best way I can describe things is still up in the air. Today was basically chop and doesn't help give us any clues as to what play to make next. Quadruple witching is coming up on Friday as well so it is certainly possible we chop around a little bit longer going into next week. My outlook remains bascially the same as last night - slightly bullish and looking for a breakout for the indices from which I can get long, but aware that definitely doesn't have to happen. I am willing to short as always if we fail here. If I see anything interesting tonight, I'll be back with a video or some notes. Take care.

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