State of the Market - 6/11/09

Wow, day traders must be loving this market. A day after starting higher, falling down midday, and then bouncing into the close, the market did the opposite today. Stocks opened basically flat but rose from there until around 10:30, where they consolidated until lunch. They broke to new highs a little after 1:00, and at that point it looked like we may have a breakout on the S&P. Alas, it wasn't meant to be, as the S&P got as high as 956 before pulling back late back into this consolidation. Stocks closed with small gains but finished well below their highs. Overall, a disappointing day for the bulls, just like yesterday was disappointing for the bears. Volume appears to be lower on the S&P today once again which is not what you want to see in a breakout attempt. On the Nasdaq, volume appears to be slightly higher.

Technically, I guess nothing really changed today. We are still locked in this range and may be locked in it for a while with the slow overall trade, as the longer this goes, the stronger those support and resistance levels will become. This is what summer trading is - volatile moves intraday due to low trading volumes. Without heavy volume, the bulls just don't have the oomph to get us through resistance, and the bears just don't have the firepower to break us through support. You know the numbers by now so on the indices, things are just the same.

I haven't been paying too much attention to my oscillators recently but one thing I am trying to watch is the McClellan Summation index. Right now, it is moving sideways much like the market. It did the same thing back in January and the patterns look almost identical. What I am watching for is whether the 9 and 20 day moving averages will cross, like they did in January. The difference back then is that the market was trending down, even though it didn't have a clear breakdown yet. Now the market is trending higher. If those do cross, I may reconsider, but for now, this is remaining bullish as well.

McClellan Oscillator

Chart from Telechart, Courtesy of Worden Brothers, Inc.

I entered ICO this morning at $3.47 - this is a stock I've been watching for a while as it hasmoved relatively sideways since November and now has some volume coming into it. I am hopeful today's breakout will be meaningful and can take it up to around $5 or so. It didn't finish as strong as I would have liked but we'll see. I still have my position in RAX but didn't make any other moves today.

My watchlist however continues to look very strong on the long side so I may be making more moves over the next few trading sessions. I am taking APSG, ORCC, and MAPP off the list as they all had either weak breakout attempts today or in the case of MAPP, a key breakdown. However, the bullish flag patterns continue to develop left and right and until I see more of these break down, I have to remain overall bullish. Ones to watch include GROW, AHD, SYNO, KONG, JCG, CSIQ, XTXI, PDO, FREE, TSRA, KNXA, FRPT, CORE, PAR, CDII, BAA, PMTI, MCRS, and RTI. There are some new names in there so check them out on your own.

We have a very interesting market here. The indices are consolidating and basically going nowhere, yet there are individual stocks that continue to work and continue to set up in bullish patterns. In some cases, it is probably better just to ignore what the market does and focus solely on the individual stocks. In the back of my mind, I still feel like, "hey, we're going to get a nasty pullback one of these days", but I have to fight those thoughts and just trade based on what the market is telling me. With the bevy of continuation patterns I see out there, that message is for now very bullish. No reason to argue, especially when my opinion counts for absolutely nothing. If we break support, then my outlook might change. Good luck Friday and take care.