Monday, June 1, 2009

State of the Market - 6/1/09

Well, like I said in the video last night, let me start by saying that I was away from my desk until about 2:30, so any observations here are from a late viewpoint on the intraday action. That being said, today was obviously a very good day for the bulls, as the market gapped open, and rose strongly from there, easily passing some key resistance points on both the Nasdaq and S&P. They pulled back slightly into the close, but stocks still ended up with major gains across the board. As of now, volume looks mixed - probably higher on the Nasdaq, but lower on the S&P. I have to wait for the final totals, but I would hope volume could come in above average across the board on a breakout like today.

Technically, the bulls are in total control here and that is all there really is to say. The S&P not only cleared 930 to make another higher high, but also cleared its 200 day moving average on the first attempt . It also looks like it will close slightly above the long-term downtrend line I showed in the video last night. That is a very impressive showing from where I sit. The Nasdaq's move today could probably be classified as a breakaway gap, which is something you rarely see in an index.

I will paying special attention to see if the 1770 and 930 areas on the Nasdaq and S&P respectively now become support on any possible pullbacks - they should be. I said in the video last night that while the Nasdaq has a real air pocket above it in which it could take off for a while without much resistance, the S&P has some heavy resistance above 930 and that it would be interesting to see how if the slight divergence caused a problem. As of today, there is no problem at all and really, the Nasdaq has room to run here all the way up to around 2150 from strictly a technical standpoint, where it will likely face some overhead resistance from early in this bear market. I somehow doubt that will happen, but technically, it is there.

The only two oddities I saw today was that the VIX actually closed slightly higher, which is beyond odd and to be honest, I have no clue what that means. It makes no sense that it would be up on a 3% higher move on the indices. Another oddity was that the XLF (financials) lagged quite a bit today and that is another possible divergence here when compared to the major indices. $13 is still a key area of resistance for the financials and I am very surprised they did not challenge that area at all today, given the strength of the overall market. Retailers did come back strong today.

Mainly because I was not near a computer, I made no moves today other than getting stopped out of my SDS position around $54.60 - oddly, my stop was set around $55.50 and was never hit on Friday, even though it closed below that. That ended up costing me a bit, as I ended up with over a 5% loss on that one. Obviously those test positions didn't work.

Looking through my long watchlist, I see sort of a mixed bag. There were some nice breakouts in stocks like GIL, FEED, OMX, THQI, FSIN, MTD, and WPZ, but half of those (GIL, OMX, MTD, and WPZ) look like they moved on underwhelming volume. I also saw stocks like WFC, ITRI, SIRO, OCN, RUTH, and PRU from last night's video that did virtually nothing today, and that is a little disappointing. As I mentioned last night, I still don't see many stocks that are really exciting me here - maybe I just have to look closer. There are a lot that are extended but I don't know that they are going to pullback after today's move. I'll remain patient.

I will likely be away from the action tomorrow as well, so I don't know that I will be making any moves, but overall you have to respect the performance of the bulls today. The only thing that would make me even think about shorting right now is a move below the 1770 and 930 areas that were such important resistance. If we see that, maybe I would reconsider, but for now, after today, the correct play is to stay focused only on the long side. I wouldn't buy just anything, but hopefully after doing my scans, I will find some that excite me a little more than what I am seeing currently. Good luck Tuesday.


Anonymous said...

Interesting comment on the VIX. I would note that beyond "lagging", XLF traded into negative territory within minutes of the close. who knows - perhaps what led us up will lead us down? The only thing i have learned these past 8 or 9 months is that just when you are thinking curve, the market thows the changeup - Whiff!!

Mac said...

Yes, the whole XLF thing is kind of weird in my opinion. I agree that the market for the past year or so has been beyond comprehension and reason - you really have to be a unique thinker to succeed right now. I am starting to give in to the bullish side, so maybe this is when we turn to the downside. today however was a big technical win for the bulls.