Thursday, May 28, 2009

State of the Market - 5/28/09

After a big up day Tuesday and a big down day Wednesday, we got another up day today on Wall Street, as the bulls bounced back from a weak start to post nice gains. The trading however was all over the map and very choppy overall, and we are still stuck in this range. Volume looks like it will be slightly lower.

Technically, you know the numbers by now to watch so I won't repeat them. We're coiling here - Wednesday's losses were smaller than Tuesday's gains and today's gains were smaller than yesterday's losses. Anytime you get that type of pattern, an explosive move is a very good possibility. The tighter this range gets, the more prepared I will try to be for the move.

I will say that the longer this goes sideways and stays range-bound, the better it is I feel for the bulls. We've just had a historic rally through April and the bears really haven't been able to do much of anything with it. That isn't to say we still don't break down, but the longer the bulls goes holding things relatively steady, the better the chances are of an upside breakout. It allows charts to set up, it reduces overbought conditions, and allows the market to recharge enough to put in that big secondary move up.

Not much else to say right now - there are some stocks that are moving like these junior bio-techs (MAPP and OCLS) that I am sure day-traders are loving, but I haven't been able to have enough time at the computer during the day to play these. Just remain prepared with a watchlist on both sides and when the move comes, you'll be ready to play it. Good luck Friday.

3 comments:

bsvcharts said...

I agree with you. The longer this goes it will eventually get resolved to the upside.

Anonymous said...

What will be the catalyst for a big move up? It seems more likely with a good news event or even a bad news event that is "not as bad as it might have been." Usually there is some "excuse" for the move up. What is credibly in the cards for next week to do that? If nothing, then post-window-dressing-selling may take over for at least a couple of days.

Mac said...

Anonymous - I wish I knew, but looking back at this entire rally, what has been the catalyst? I mean really, what good news has come out? I can't think of anything overwhelming. The stress tests were jokes. The banks are still offering dilutive offerings. Earnings were OK based on very low expectations. Jobs are still hard to come by.

I am just going by the charts and so far, if this range continues, then the bulls have a good shot of winning out.

Perhaps a bad news event - North Korea, interest rates, ??? - is the catalyst for a breakdown. That could happen.