Wednesday, May 13, 2009

State of the Market - 5/13/09

We got a pretty serious session of selling today on Wall Street, as stocks started the day lower on poor retail sales and continued in that direction for the rest of the session. The market gapped right to the short-term support around 900 and 1700 and bounced briefly from there, but it couldn't hold and they fell further from there. From about 1:00 on, they moved sideways in a consolidation pretty much into the close, as the bears could not push their luck too much and had to settle for the big losses already in place. As of now, volume looks like it will be lower however, which would avoid another distribution day. I have to check to see if we get a big push into the close.

Technically, I said that 1665 would be a possible area of support (maybe the last area of support) on the Nasdaq and it would be important to hold that area. It looks like the bulls did hold it, but just barely. Any further selling in this area would likely lead to a much more severe pullback, possibly down to around the next level of support near 1600. The S&P never got low enough to test 875 and that is still a key area to watch. Right now the S&P is sitting right on its 20 day moving average which has held the entire rally so far. If that breaks, much like the Nasdaq, we are probably looking at a more severe pullback. Right now, the 50 day is around 825, so that is an area that could act as support next. The XLF did get as low as $11.10 today, but bounced back from there and it looks like they will close right above the $11.30 area that is important support. Retailers however broke down hard as expected on the news and look very toppy.

With volume coming in lower once again, I still can't write off the bulls yet, but they need to step up quickly. While the lower volume on this selling is a positive, two negatives that I see today are that a lot of the momo plays I showed last night that were consolidating fairly well broke down today and look much uglier. The only ones that I really like as of now are CSIQ, MRT, RCRC, and RUTH. Breakdowns like SRZ, FITB, CENX, BJGP, JASO, and even BAC are not good signs for this being just a quick pullback. In addition, the McClellan Summation that I showed last night is starting to indeed turn lower. It did not cross below its 9 day moving average yet, but it looks like that will happen soon. That would be bearish as well.

Overall, let's see how the final volume comes in but right now we are definitely in an area where the bulls have to step up or this could quickly turn from just a pullback to a full-blown correction that could move much lower. I am glad I didn't buy any pullbacks today - I was tempted though - and will now watch to see if the bulls come to play. This is what probably a lot of traders have been waiting for and it will be interesting to see if dip buyers come in to play here. Either this is a really great time to buy or the last chance to get out before more trouble comes. One more day of heavy selling will likely give us the answer. If that happens, I will turn to shorting stocks that have had heavy volume breakdowns the past few weeks. I didn't find many setups last night on the short side - maybe I will find more tonight. If I do, I will try and post some, although it's game 7 between the Caps and my Pens tonight, so I will have some other things to do. Take care and good luck Thursday.

1 comment:

seeer said...

You can check the volume here right after the session:
NYSE: http://stockcharts.com/h-sc/ui?s=$NYA&p=D&yr=0&mn=6&dy=0&id=p23654864249
Nasdaq: http://stockcharts.com/h-sc/ui?s=ixic&p=D&yr=0&mn=6&dy=0&id=p23654864249