Tuesday, April 7, 2009

State of the Market - 4/7/09

Another down day today on Wall Street, as stocks started lower, stayed in a holding pattern until lunchtime, and then fell to new lows around 1:00. They moved basically sideways from there into the close, finishing with large losses. Volume however was lower on this holiday week trading session, so that is good for the bulls.

Technically, I see the indices have pulled back basically to their short-term 9 day moving averages, and as long as those areas hold, then I think the bulls can be happy. Both the S&P and Nasdaq closed slightly below the 9 day on my charts but there is a uptrend line right here as well so I don't think it is a big deal. With volume coming in lower the past two days, as of now this looks like nothing more than a healthy pullback which has allowed some of the overbought conditions to be worked off. As long as the bulls can hold the area we closed at today, then I think they remain in control of things. If we break below the close of today and don't quickly reverse, then things could get trickier. Watch 801(20 day MA) and 789(50 day MA) on the S&P for support on any further selling.

I didn't do anything today and it turned out to be a good decision because the areas I would have been focusing on (financials) actually bounced up off their gap down and closed off their lows, even with the market closing near its lows. I have to take this as bullish. I am not saying that I will be buying any financials any time soon, but they have shown a bit of strength in the past two days when they didn't sell off in the face of a market selling off. Perhaps this is a change of character that I need to respect. XLF is also sitting right at its 9 day moving average and a trendline, so as long as this area holds, I think the bulls remain in control, much like the indices.

For tomorrow, I guess I would lean more bullish right now in the short-term, although I don't know if I want to do anything in the low-volume environment we will likely see the rest of this week. Earnings season is starting up as well so that always makes things tough. In terms of individual plays, the only stocks really breaking down from the shorts I showed this weekend are the education stocks, so that again has to be considered bullish I guess. I did see a few long candidates break their 9 day moving averages to the downside (SOLR, ASIA, HOTT, WSBC, BWLD) which is not good but none look awful. I continue to keep my eyes on the same set of stocks I've been talking about this week -solars and a few others.

The best thing that can happen from where I sit is for the market to just do nothing for the next two days - trade in a tight boring range in this low-volume environment. With earnings, I don't know if we will be that lucky, but if it happens, I would have to get more bullish. As it is, I will lean to that side but probably not do much. If I see any new, interesting stocks tonight, I'll try to share. Good luck Wednesday.

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