Thursday, May 14, 2009

State of the Market - 5/14/09

We saw a bounceback session today on Wall Street, as the bulls stepped up and held important levels of support, pushing stocks to decent sized gains. The day started slightly higher, but then stocks quickly fell. This is where the dip buyers came in and lended support, and from there, stocks rose steadily throughout the rest of the session, particularly on the Nasdaq and small-caps. Both of those indices outperformed today. There was a pullback into the final hour, but stocks still closed with gains. The main negative today is that volume appears to be a good bit lower than yesterday, not what you want to see if you're a bull.

Technically, since those support levels around 1665 and 875 held so far, I have to say the bulls are still in control, but as I said last night, they're still in the ICU. Until those levels are broken and volume starts coming in heavier on the selling, I think I have to keep that mindset. From here, I will be watching the 9 day moving average to see if it acts as resistance or if the bulls can reclaim it and reestablish this uptrend which is in doubt after yesterday. 1700 on the Nasdaq looks like pretty formidable resistance on the 60-minute charts, so watch that carefully as well as 900 on the S&P.

I stayed in cash today - just don't feel it yet. My top possible plays on the long side right now are CSIQ, PCX, BAC, and RCRC, yet I didn't see quite enough strength in any of them to jump in today. One of the things I am working on as a trader is my patience, and this is a time where I still think patience may be a virtue. If we are putting in an important top, it likely will be a few weeks process. Most meaningful tops are. If this is just a pullback, the strength will reemerge and offer chances to get in for another move higher.

That's about all I got for today - I keep looking for clues but right now I think the market still could go either way. However, I didn't like the fade late today and compared to yesterday's selling, the bounce today was not that impressive. If I happen to start finding more compelling short setups in my scans, I will likely begin to lean that way. Good luck Friday - be careful with options expiration.

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