Friday, May 15, 2009

State of the Market - 5/15/09

After a brief bounce yesterday, sellers came back today as after an up move to start the day, stocks sold off steadily from around 11:00 on and around 3:00, things looked bad as the S&P flirted with key support. There was a bounce, however, into the close finished with relatively small losses. The Dow and S&P were a good bit worse than the Nasdaq, which outperformed for the day. Volume was lower - I thought it was options expiration today but based on volume, I was wrong.

Technically, it looks like we will have a test of key support at the January highs on both indices now. The Nasdaq hit 1665 earlier this week and did bounce, but the S&P never got down to the 875 area. It did today and we have all of the indices now sitting on those key support levels. A bounce is still possible, but the longer it takes to develop, I believe the weaker it will end up being. I expected some stronger efforts by the dip buyers this week and we didn't really see that much at all. I am also seeing what look like bear flags setup on the financials and the Nasdaq which are ominious if they keep forming. The pullback on the S&P looks a little better. Either way, a break of those support levels will likely signal another move lower in this pullback.

I was away from my computer for most of the morning and I remain in 100% cash, as I still want some confirmation on where we head next. Based on what I said above, I am starting to lean more bearish overall but am waiting for more setups like SYMC (which looks really good) for instance before getting heavily short. I know this is boring, but sometimes waiting is the best play. If you are bearish, perhaps another or two days of weak volume to the upside would be just the ticket to set up some nice bear flags on individual charts. Meanwhile, if you're a bull, I think you better start hoping for some buying power soon before this rally drifts away.

Take care this weekend and I will try and put a video up depending on what I find in my scans.

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