Monday, April 13, 2009

State of the Market - 4/12/09

Another bullish day today on Wall Street, as although the indices finished virtually flat for the session, they did manage to rally all the way off their morning lows in another show of buying strength. Stocks gapped lower to start the session, and basically moved sideways through the lunch hour. A little before 2:00, they broke to the upside, quickly consolidated for another hour, then tried to push to the positive side in the final hour of trading. A late pullback took away some of the gains but all in all, you can't complain about the action if you are a bull. Volume was very low however.

Technically, the next lines of resistance for the Nasdaq and S&P remain 1665 and 877 respectively. I don't like that we are overbought heading into that resistance, but so far being overbought hasn't mattered. The financials via XLF kept running today although I really didn't like seeing the lower volume on fresh highs. That is something to watch for here - if volume starts dying off like it did today as XLF keeps moving up, then a turn might be right around the corner. $10 should act as strong support there now. The McClellan oscillator is right around 200, so it remains slightly overbought. The T2108 is over 90 now, the highest I've ever seen it.

I still didn't do anything today as I continued to get stuff done around the house, but I regret missing FEED breakout so nicely today. I listed that stock in my last post and it was a great move today. I am still very hesitant to buy a market approaching resistance and that is overbought, but there are a few stocks I will continue to watch here. STP over $14.60 area looks good to me, along with all of the other solars (in order of preference - SOLR, SOL, CSIQ, JASO). I like RGR in this area with a stop below $11 or so. OCN still looks good as a flag pattern. BBBY looks like it is forming a nice earning flag and with a few more days of rest, I would be interested in that as well. Others to watch include CWCO, DPZ, DUF, STX, BX, ATRO, and WSBC.

One thing I don't like about today is that I started to see some ridiculous moves in speculative names like DRL and CAEI on no news that I could find. When these moves start occuring randomly, it is usually a warning sign that things are get a little "frothy" so to speak. It may not mean anything, but I just wanted to point it out.

Overall, there is reason to be cautious here on the long side but the action continues to be bullish from day to day. My game plan is to cautiously watch the longs I listed above and play a few if I can get over my skepticism of this rally and fear of getting in right near the top. My gut is telling me that as soon as I go long, this thing will reverse and I will be messed up in the mind for throwing in the towel right at the top. We'll have to see what happens I guess. Be flexible is probably my best advice right now. Good luck Tuesday and keep an eye on those earnings reports. Take care.

1 comment:

swingtrader said...

Overbought is an understatement - but when new trends erupt it can stay overbought longer than anyone expects.

Good example - the 2006-2007 bull run. The market went straight up for the first say half of that rally until the "machine glitch" day where the market fell 400 points in March 2007. The market was overbought for what seemed like months.

Not saying we are going to Dow 20k or anything, but we can stay overbought during a trend while the shorts continually get stopped out. It seems to always last longer than people think.

I agree that the action is bullish - the market doesn't sell immediately at first resistance anymore, and even bad news can't keep it down long. That by itself shows the character of the market has changed for now, IMHO.

BTW - Do you use Stockbee's earnings trade technique? I looked through it last night and it looks simple but promising.