Friday, July 24, 2009

State of the Market - 7/24/09

Although the stock market finished mixed today, it was a very impressive day on Wall Street when all things are considered. A rash of bad earnings reports had the market down a good amount pre-market, and stocks did sell off for the first hour or two of trading today. However, they never fell completely apart, and a little before lunchtime started a move higher that lasted the rest of the session, allowing the S&P to close slightly higher and the Nasdaq to close well off its morning lows, both at their highs for the day. Volume appears to be much lower.

In the face of bad news and severly overbought conditions, the performance today by the bulls was certainly impressive. I think everyone (including me) has been expecting a pullback this week and when those earnings came in last night, the thought that went through most traders' minds (including mine) was "well, this will finally be the catalyst that lets this market rest a bit". The bulls were having none of it, and although they didn't have a big day of gains, the fact that they could close this market at its highs for the day shows how bullish overall this tape has become.

Technically, there remains little doubt that this market could use some rest, and further gains from here in my opinion depend on some consolidation so that the market doesn't have a blow-off top. That's was common sense tells me. I know it doesn't have to happen, but I will continue to look for it and in all honesty am hoping it happens. The technical points I made in the video last night remain true - the Nasdaq is right at a long-term downtrend line stretching the entire length of this bear market back to late '07. A pullback or consolidation there would be completely normal and again, very healthy. The S&P is approaching the top of a broadening formation near 1000, which also is a normal place for it to consolidate. Hopefully we will get some. It certainly seems that any pullback that occurs can and should be bought, and that's the outlook I am taking. I know it seems tempting to short a market after it continues to defy gravity, but right now, it is simply the wrong play (as today showed).

I will be back this weekend with a video or two looking at this market more in-depth. I was away most of the afternoon today and still only hold positions in ISRG and JDAS, but will be looking to add more next week depending on how the market acts. Right now, although a few of the stocks I had on my list brokeout today without me, I am watching several more very closely whose patterns actually have me very interested. That hasn't happened in a while, and I am just hoping we don't see another turn like we did in early June, when so many nice patterns quickly turned ugly. Right now, not much is saying that that will happen. Take care and enjoy the weekend.


Lee said...

Nice work as always and look forward to your comments each evening.....

DDRX and RAX - I have traded in/out of these for some time. You had a video not to long ago on DDRX. I think the chart looks good, although lower volume past month has me concerned. Was wondering what your thoughts were on going long here. As for RAX, it appears it may have had a double top sell-off Thursday with volume.
Your thoughts on going long if it moves above 15 next week.
Thanks again!

Cary, Portland Or said...

Went in with you on ISRG...excellent call. Post on Twitter if you elect to sell, but right now the stock looks solid.

Anonymous said...

which specific setups do u have your eye on? if you dont mind me asking

Mac said...

DDRX and RAX both look like they are building little bases here. However, I would like to see more volume come in on the right side here - if you look closely, volume has lagged a bit compared to some of the volume seen in June while it was moving higher. They are possibilities but neither popped up in my scans.

I will comment on ISRG as we go along and always try to post buy and sells on Twitter. For now, there is no reason to sell and I have my stop a bit above breakeven from where i bought it. It will (should) pullback soon, and as long as it is rather calm, there is nothing to worry about. It has a catalyst to move higher now and as long as the market cooperates, it should do that.

I will have a video up later with some setups.

Thanks for the comments.