Thursday, December 18, 2008

Things Don't Look Great - Bulls Need To Step Up Tomorrow

Just got back from dinner and it is late, so I am just going to share some thoughts from my scans instead of doing a whole video.

After going through my scans, I guess I have to lean bearish right now for several reasons. The indices are all sitting right at important trendlines and don’t have a lot more room to the downside here before this rally could get into trouble. I am also seeing many, many more attractive short setups compared to the number of attractive long setups I see. There are really only two longs that interest me (AIPC and CSKI). That is disconcerting to me. I think if we were going to continue higher here I would see more nice charts.

Selling pressure wasn’t very intense today and I didn’t see many real technical breakdowns in individual stocks tonight in my scans so that’s good for the bulls. One thing, however, that did stand out in the scans is we have 171 stocks that are up over 50% or more in the last twenty trading sessions. That is the highest number I have ever seen and is what I would call dangerous. The closest number we’ve had to that was on August 11, when there were 125 stocks up 50%+. Check out August 11 on a chart to see what happened after that. That number tells me that there are many individual stocks that are overheated (even with the recent pullback) and that is usually a bad thing.

As always, I am trying to keep an open mind here, but if we break those trendlines, then I have to think things could get ugly quickly. We'll just have to see. I feel like a politician this week because my daily outlook has flip-flopped so much, seemingly each day. That’s how this week has been – just like last week, we’ve moved around a bunch but haven’t really gone anywhere. We opened last Monday at 882 on the S&P and today we closed at 885. That makes trading (at least swing trading) tough. I know a breakout is possible (watch 920 and 1600 on the S&P and Nasdaq respectively) and will still play it if it happens, but the way things look it, frankly it would surprise me. Watch those levels and if they are broken, then I would look to get short, even though I'll probably just get whipsawed out again.

Here are some of the ones I am watching on the short side. Sorry for no charts tonight. Quite a few retail and restaurant stocks on this list. The setups are definitely there for the taking - will they work is the real question.

Shorts to Watch - BBBY, FWLT, TXRH, EDU, NDAQ, KSS, EAT, DF, BWLD, EQIX, CEC, XLF, WTW, CPKI, RSH, NTCT, TGT, SINA, ACO, NTES, HNI, CYBS, NEU, SBUX, TSCO, BRE, EV

Good luck tomorrow. I am going to miss the first few hours of trading - maybe that is a good thing. Watch out for those options days.

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