Wednesday, March 4, 2009

State of the Market - 3/4/09

After being beaten down for a long stretch, Wall Street finally put in a bit of a bounce today, as stocks started higher, fought off more selling, and closed with large gains. The first ten minutes of the session was strong, but stocks sold off the nice open quickly and things looked bad around 10:00. Stocks held though and did move higher throughout the rest of the morning. They pulled back starting around lunchtime, but held their opening highs and then moved higher as the final hour approached, breaking to new highs a little before 3:00. That didn't last, however, and stocks fell into the close, ending with large gains but well off their highs for the day. Volume was a good bit lower than the past three sessions.

I didn't do anything today as I still haven't seen the setup of a big panic-type move lower from which I would want to take a shot at putting some longs. Going long here this morning was simply guessing, and if you guessed right, congratulations. As I said last night, I thought the setup going into today was not good for shorts or longs, so I would rather just sit out rather than gambling. As it is, we'll have to see if this bounce amounts to anything. So far, I think it looks a lot like the bounce from last Tuesday. That was quickly sold off and if we see the same thing here, then this market is in a world of hurt. That close certainly wasn't impressive.

Yesterday, I posted 740 and 1385 as levels to watch in terms of resistance on any bounce, and I plan on following those levels closely. IF we get that high, it might set up a very good shorting setup. I don't know mean to be a party pooper, but there is a lot wrong with today's bounce. Financials were lower for much of the session and severely lagged the market. That is not good. No one can tell me that we've seen panic selling either - look at the VIX. That is not good. We never did hit extremes on the numbers I follow as well. That is not good. Volume was lower today. That is not good. That close was very bearish. We could still move higher from here due to being oversold, but in terms of this being the start of something meaningful, I just don't see it. I've explained for the past week or so that a one or two-day bounce is about the worst thing that can happen to this market because it is just prolonging the inevitable. That's my opinion at least.

That's about it from my perspective - there is nothing I see that makes me think today is meaningful at all and if we bounce a little more, I will look to reload on the short side. Jobs report is coming up Friday so be careful here. Good luck.


Anonymous said...

Maybe we've just run out of buyers AND sellers. What's a market to do without them. Sell short and cover.

Mac said...

I know I am tired of this market, so maybe you have an idea there.

Anonymous said...

I think you are spot on Mac. Alot of people are dismissing the need for a cathartic move lower saying we are basing out right here - probably the same people who advocated the theory of "decoupling" 2 yrs ago. All I know is that when the President of the United States stoops to the level of financial advisor and says now is the time to buy stocks, you should probably sell them.