Thursday, April 30, 2009

State of the Market - 4/30/09

Another good opening greeted the bulls today on Wall Street, as stocks started higher and continue to move up for the first hour and a half of trading, building on yesterday's gains. However, much like yesterday, those gains faded around 11:00 and a steady decline ensued that caused stocks to give up almost all of their morning gains. A temporary bottom was put in around 1:30, from which a bear flag formed on the 5 minute chart. Stocks broke down from this bear flag right as the final hour started. They tested the 2:00 lows, bounced, but then fell again a bit into the close to finish basically flat but well off their highs. Volume appears lower on the S&P but higher on the Nasdaq.

Technically, this is the second day in a row that the indices faded their early gains and it is very possible the buying interest is fading as well around here. The Nasdaq touched its 200 day moving average early and reversed, and S&P broke back above 875 for the second straight day but couldn't hold above it. Again, I have to think this could be a sign the bulls are getting tired here. You can't really blame them after the rally they've put in. As I've been saying, a pullback here would be completely normal. Let's just watch how the pullback plays out and how severe it is before determining where we go next. I would watch around 860 on the S&P as short-term support if we do pullback further, and 1680 on the Nasdaq.

This morning, I took a small position in HERO on the breakout attempt above $3.10. I entered at $3.09, but was later stopped out at $2.89 as it reversed hard, falling almost 10% from its intraday high at $3.19. Just another typical trade for me - of course it did rally all the way back. I would have been better off just staying away. When the market reversed, I went into a few small positions in some shorts - ACM at $25.91 and ADM at $24.63. I am willing to add to these if they work out but as of now just want to keep things small. If we do start selling off, I have a list that I will be watching for possible shorts (LZ, MET, RRC, SIGM, DCI, AMT, SLH, AAPL, CM, DECK, NOV, BYI, PNFP, and TRH).

As always, we'll see what tomorrow brings but the past two days, the bulls have shown some fatigue in my opinion and with May starting tomorrow, it is possible we pullback as I stated earlier. It doesn't have to happen, but it certainly would not be suprising. As I stated last night, I would be very careful with longs here and be ready to short on further selling. Good luck Friday.

1 comment:

szaman said...

Mac- I had the same HERO trade. I am glad I didn't have any stop and I was away in meetings.Sold it at even towards the end of the day.