Monday, July 13, 2009

State of the Market - 7/13/09

A very good day today on Wall Street for the bulls, as positive comments from Meredith Whitney provided the catalyst for a massive rally. Stocks started slightly higher but dipped for the first half hour of trading. Around 10:00, they put in a bottom and rose steadily and strongly for the rest of the session, finishing with strong gains and at their highs for the day. Volume will likely come in higher than Friday but does not look like it will be above-average as of now.

Technically, the numbers I focused on in the video this weekend were 1779 on the Nasdaq and 892 on the S&P. There was serious resistance at both those points and both were overtaken today which is good for the bulls. For the S&P, I will be watching 902 and then 911 as key resistance points - if those happen to be taken out as well, then I will likely reassess my bearish outlook. On the Nasdaq, 1800 is an area where the former uptrend line is at right now, so I will be watching to see if the bulls can overtake that. Just as with the S&P, a move above this level would be very bullish for the markets, but it is not a given.

Sector-wise, financials were the big winners today as they took out short-term resistance and are now have the 50 day moving average and a downtrend line to deal with around $12. A move above that for XLF would be quite bullish. RTH moved up a bit today but is still basically in a consolidation pattern. $76.65 is short-term resistance there and what I will be watching. The one thing that stands out for me today is that oil really didn't participate in the rally, which I find weird. Crude is extremely oversold but was flat for the day. XLE and OIH moved a bit higher but still look to be in bearish consolidation patterns. I would need to see this group as well as other commodities firm up before getting really bullish overall.

Some of you may be wondering why I haven't been trading much at all over the past few weeks and days like today are the reason why. I mentioned a few times last week that I would be surprised if the bulls just gave up so easily here and the market rolled over, and that's why I passed on shorting at the beginning of last week. In hindsight, I probably should have, because it turned out to be a nice area for two to three days short trades. Overall, though, I can't say I am mad about being in cash here. I am still bearish overall but realize that earnings will lead the market in its next direction and therefore am trying to be patient and wait for the perfect moment to make some big moves. I don't think we are at that moment.

What I think may happen over the next week is that these earnings releases are going to play havoc on any technical patterns out there, and that things will be very volatile. For day-traders, it will be great, but for more intermediate-term traders, there might not be a lot to do. I will look to play earnings moves to the upside if they present themselves, because I missed a ton last quarter and am still kicking myself about it. If you want to look back at some of the movers from last quarter and the power good earnings can have over a stock, check out charts like STEC and DDRX. Those have put in multi-week moves that were huge. I will try to post any possibilities I see out there as they happen.

That's about it for today - after this move, I am definitely less bearish than I was but the bulls still have some convincing to do to me. One day does not make a trend, and as I just said, the next few weeks will likely be dominated by earnings releases and the reactions to them. That makes for a tough environment, so be careful out there. Take care and good luck Tuesday.

1 comment:

NYC Trader said...

Mac- Why don't you just take one day at a time and start day/overnight trading? Stick with 60 min. short term charts.That's what I am doing and it's been pretty good.