Friday, June 12, 2009

State of the Market - 6/12/09

Another slow, choppy day today on Wall Street, as stocks started slightly lower, traded lower for about an hour, and then went into a holding pattern until a little after 2:00. They tried to bounce there, but couldn't and fell back down into the close, finishing basically flat for the day. Volume was very light.

Technically, we are still in a range here and there isn't much else to say. I'm still watching the McClellan Summation Index for a possible moving average crossover, but so far, we still don't have that. I am also keeping a close eye of the financials (XLF) as they are coiling very tightly here right at their 200 day moving average. A breakout for this group could mean a breakout for the market.

While the indices were pretty boring today, I did see some things in individual stocks that makes me take a bit of a pause here. If you follow me on Twitter, you know I talked throughout the day about several strong stocks that were breaking down below short-term support. For me, I like to use the 9 day moving average as one level of short-term support, especially in very strong momentum stocks, and today I saw a lot of stocks breaking down through that level. Normally, that is not a good sign in the short-term. Now, overall, a lot of these stocks did bounce back and closed at or above that level, which is bullish. Those include SYNO, MCRS, TSRA, KONG, RAX, CSIQ, JCG, and RTI. Others that were strong that didn't bounce and look bearish to me now include GROW, PDO, and FRPT.

After seeing so many great setups this week, my outlook had to be bullish, but for now, I would say I am a little more cautious after today. I still am holding my RAX and ICO positions and that's it. The markets weren't down enough for the strong stocks on my watchlist (from the previous paragraph) to get really hit, but they did and that perhaps that is a warning sign. Again, most closed above short-term support so maybe it won't be a big deal. As it is, I probably will be more hesitant to jump into more longs early next week until we get a clean breakout above 950-955 on heavier volume. I am certainly not shorting here - no way, not until a clean breakdown - but I am more cautious.

I hope you enjoy your weekend - I have game 7 to look forward to tonight as my Penguins go for the Stanley Cup. 2009 has been a great year for sports fans here in Pittsburgh, as my three favorite teams (Steelers, Pitt basketball, and Penguins) have all either won or competed for championships. Detroit is tough and I am not holding my breath about tonight's game, but you never know what can happen in a one-game situation. Take care, and go Pens!

3 comments:

Anonymous said...

Mac,

What makes you think financials are coiling for an up-move? That's the impression I get anyway from use of the term "breakout," although technically stocks can breakout in either direction ... but wouldn't you agree they could also be coiling for a breakdown?

GT

Mac said...

Typically, coiling patterns or symmetrical triangles are continuation moves, meaning they USUALLY break the way of the overall trend, which in this case is up. It just looks bullish to me overall. I am not discounting a breakdown and wouldn't be surprised by it, but I was just looking at it as an overall bullish pattern.

1opton said...

Your Pens are up, but ouch! Crosby is out!