Wednesday, July 22, 2009

State of the Market - 7/22/09

A mixed market today on Wall Street, as strong earnings from AAPL sent the Nasdaq higher for the eleventh straight day while the S&P tried but failed to break to new highs for the year and closed slightly lower. It was a choppy session, with stocks rising overall for the first half of the session, but pulling back into the close a little before 1:00 as the S&P tried to breakout. Volume appears to be lower on the S&P but flat to higher on the Nasdaq.

Technically, we continue to be quite stretched here to the upside but overall the market just doesn't want to seem to pullback and you have to respect that. That's why I have not shorted anything for a while and don't plan on doing so anytime soon. A few of the shorts I put in the video last night like UNT and CNQ gapped down in some cases, but then reversed right back up which is bullish. WFC and MS also acted similarly in the face of disappointing earnings, which is also bullish.

For the S&P, today was a weak attempt at breaking to new highs that failed, but it isn't the end of the world. As I said yesterday, the best thing that could happen here is some rest and perhaps just some sideways action that would frustrate everyone expecting a pullback, while at the same time working off some of the overbought condition present now. For the Nasdaq, it is coming up to some possible gap resistance around 1947 and really does need to rest for its own health. If you are a bull, it might be nice to see this type of move, especially if you're making money off of it, but for the market to continue higher for the rest of the year, it has to consolidate a bit. If it doesn't, the possibility of a blow-off top comes into play and then a bearish reversal after that. If we do get that needed pullback, 1879 should act as support for the Nasdaq.

I made no trades today after deciding to pass on OFG as an earnings trade, at least for now. It did have a nice move but I think I will simply watch to see if it forms a bull flag soon and then maybe reconsider. JDAS pulled back as is to be expected but as long as it holds the bottom of its range yesterday, I think everything is OK there. There were some breakouts from the video last night including LULU, UNTD, and OGXI, but I stayed on the sidelines for now. I really have a hard time buying regular patterns with a major index up 11 straight days.

We'll see what tomorrow brings, but right now earnings are being well-received and as long as that continues to happen, the chance remains that this market can continue to defy all common sense and move higher. A pullback certainly makes a ton of sense here and I would still watch for it, but it is not a given. Remember, this "new" market we are in is one where what used to make "sense" just doesn't anymore. That's why it's been so difficult. Take care and we'll see you Thursday.

1 comment:

Cary said...

ISRG..good luck, you have more guts than I do...

CW
Portland