Thursday, January 22, 2009

State of the Market - 1/22/09

Are we having fun yet? The stock market continued with its volatile trading today, as after a big move down Tuesday followed by a big move up today, stocks decided to kind of make both moves in the same session. The day started with futures down big pre-market and after moving sideways for about an hour after a gap down, stocks continued their move lower all the way into the lunch hour. A temporary bottom was put in at that time and stocks moved higher for about an hour, consolidated for another 45 minutes, and then started a move upward around 1:45 that took them to new intraday highs for the session. This move certainly looked bullish at the time, but because nothing can be easy in this market, stocks gave back most of this move starting at 2:20 and sold off into the final hour. After moving sideways for about a half hour, stocks popped briefly and looked like it would bounce into the close, but that didn't happen and stocks finished right in the middle of their intraday range. Volume was heavier on the Nasdaq due to MSFT and AAPL, but looks to be lower on the S&P. All in all, quite the roller coaster ride today, and I don't think we ended up going anywhere.

Technically, it looks like the downtrend line I showed last night is indeed going to act as heavy resistance, because the S&P, Nasdaq, and XLF all were rejected at that line today. If they somehow get above the downtrend line over the next week or so, they would then still likely have to deal with their moving averages and that will probably be difficult, so the bull case still doesn't make much sense for me here. On the downside, the 800 area on the S&P is important and if that breaks, then I would guess we would have a ticket to the 740 area, which coincides with the November 2008 lows. The 1440 level on the Nasdaq is important short-term and if that is broken, the 1390 level will be the next level of support to watch. The Nasdaq remains in better technical shape compared to the S&P, but it could certainly fall apart quickly and also get down to test its November lows. Sentiment indicators and oscillators continue to be pretty much neutral so they aren't giving me a whole lot of clues as to where we head from here.

I had a meeting at work today that kept me away from the computer until around 3:00, so I didn't make any trades today - after seeing the volatility, I didn't see any good edges out there. Frankly, I was confused. There is so much going on right now in terms of news and earnings that it is just really hard to get a grip on what this market is going to do from hour to hour, not to mention from day to day. News-based environments are particularly difficult and tricky - that's why I said recently that if you have to trade right now, I would just stick to day-trades. Just too tough right now to hold onto positions for more than a few hours right now.

I am being honest when I say I really don't have a good feel for where we go tomorrow. The trend is definitely down and we are not really oversold, so if you have to do anything, I would look for short-term shorts. Better yet, I would probably just sit these random, unpredictable moves out for the time being - that's what I am going to do. When better setups start showing up in individual charts, I'll jump back in, but I have had a lack of those this week (which I've talked about) and maybe that's a sign that this just isn't a good time to make a lot of trades. Tomorrow is Friday and it will be interesting to see what happens before the weekend in this type of environment - good luck.

No comments: