Friday, May 22, 2009

State of the Market - 5/22/09

We almost had a bounceback session today on Wall Street, as stocks opened slightly higher, fell quickly, but then bounced back into lunchtime. From there, they basically moved sideways in a fairly tight range until the final hour. At that point, they tried to break out of the range, but couldn't and pulled back strongly into the close, finishing with small losses. Small caps underperformed on the day. As could be expected going into the three-day weekend, volume was extremely low.

Technically, a bounce today wasn't unexpected but as the late fade showed, it was very weak and has to be disappointing for the bulls. We are still in this range from 930 to 875 on the S&P and 1770 to 1665 on the Nasdaq and there aren't a whole lot of big moves to make as long as we stay in this area. I still feel we're putting a top in here, but tops take time so this sideways chop is probably a normal thing. A breakout is not impossible, but based on individual chart action among other reasons, I still expect the market to pullback a good amount over the next few months.

I didn't do anything today and am still sitting with my QID and SDS positions from Wednesday. I will continue to watch for short candidates and will try to get a video up this weekend, but right now I just don't think it is smart to trade a lot right now. If we rally a bit higher on very weak volume, I may put one or more test shorts on, but as of now I think waiting for a breakdown makes sense.

Enjoy the three days weekend and take some time to remember those who have given the ultimate sacrifice for you and I as Americans. When I watch the news and see what has transpired over the last year and a half with the economy and bailouts and greed and corruption in Washington and on Wall Street, I do get very frustrated as an American. However, the ideals of freedom and liberty that our Founding Fathers established over 220 years ago in our Constituion are universally attractive and good and will hopefully live on strong for another 220 years. We have our servicemen and women to thank for that. May God bless you all, either in service now or from the past. Take care and have a great weekend.

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