Monday, July 27, 2009

State of the Market - 7/27/09

We had another down day today on Wall Street, but much like Friday, the bulls were able to fight back after a rough open and limit much of the potential damage. After rising slightly for the first half-hour of trading, the market dropped sharply around 10:00 for about a half-hour. It bounced up to where it opened by lunchtime, pulled back again into the early afternoon, and then, as was the case Friday, started moving higher into the close around 2:00. The move in the last two hours allowed stocks to finish slightly higher but basically flat after being down a decent amount earlier. Volume was quite light today, which coincides nicely with a consolidating market.

Technically, I mentioned on the video that a rest would be tremendous here for the bulls, and the best case scenario for "resting" would be some sideways action that could form a little flag pattern but allow the market to catch its breath a bit. As of now, that looks to be what is happening here, particularly on the Nasdaq. I would really love to see about two to three more days like today, where we go nowhere but the bulls fight back any selling, as I think it could set the market up nicely for another move higher. Whether we actually get that type of action is unknown. The only complaint I have is that the S&P is wedging higher a bit, and in tmers of consolidating, it is not really pulling-back. You can't fault the bulls today, but I almost wish they were a bit weaker. Short-term support on the S&P remains around 956 and on the Nasdaq it's around 1920 (9 day moving average). A break above Thursday's high of 1979 would probably signal another leg up in this amazing and still surprising rally.

If you follow me on Twitter, you know that I did take a few long trades this morning, all of which were highlighted in the video this weekend. I entered CPSL at $2.95, BEXP at $4.36, and ININ at $17.94 not long after the market opened. None were large positions, as I continue to work my way back into the market, but based on the setups, I felt they were worth a shot when they broke above the trigger points. I also took smaller positions based on the market being quite overextended. I debated between SDTH and ININ and in hindsight wish I would have entered SDTH. Volume was a little underwhelming in ININ and it gapped above a perfect entry point around $17.50, but I decided to enter later anyway. I should have listened to myself - I was stopped out at $17.42 for a 3.17% loss. As of now, I still have about 65% cash on hand in my regular account but am almost fully invested in my IRA.

Unfortunately in the short-term I did not take profits in either CPSL or BEXP today as I decided to let the patterns play out a bit. These weren't intended to be day-trades and in the case of BEXP, I hope it can develop into a trade of several weeks. They finished off their highs but look OK overall. As it is, my stops will be moved up as they hopefully move up as well. ISRG had a nice consolidation day as well where it didn't give up much and my stop remains in place. JDAS broke slightly below support at $20 today but bounced back. My stop is still in place there as well and if it doesn't start moving soon, I expect to be stopped out with a small loss. It is not acting the way good earnings plays should act as of now - I've been disappointed overall.

I will continue to look for strong setups in my scans and will also be checking these earnings reports out as they come out for possible plays there. I plan on being very particular in what I buy due to the extended nature of things, but there is no point right now in being stubborn and fighting this market by being a bear. I still like SWHC after today, and will be watching CSL, SKX, SNS, and RNOW as they form consolidation patterns that look pretty good. ANR and FCL are two others I will be watching closely (volume was perfect today on their pullbacks) but I need them to pullback a bit more before really becoming interested. If the market cooperates, these could all work very well. That's my only fear here - will the market cooperate???

That's about it for today - the bulls remain in total control and although we do need to continue to rest and consolidate all the recent gains, it is not a given it will happen. Anything is possible in this market - remember that. Good luck Tuesday.


Anonymous said...

Hi Mac!

Nice to see you testing the waters again!! You have been right too many times and its time to make some money out of it.

I have a question for you if you dont mind....I am thinking of opening a Roth IRA account and start trading from it. Mostly day and swing trading. Are there any restrictions for trading often from an IRA account?? Thanks!!

Good Luck tomorrow!

Mac said...

Thanks Anonymous. In terms of Roths, there are a few ways it is different from your normal margin account. First, you can't short anything. You can play the inverse ETFs but that's it. So while I made a lot of money in my personal account last year, my IRA sat in cash most of the year.

Secondly, you must wait three days (normally) before using proceeds from a sale on another trade. This stinks sometimes and cuts down on the amount of trading you do in the IRA. for example, if I put all my money into a stock and then get stopped out the same day, I am frozen from trading until that money clears and then I can resume. It is basically the same rules as trading in a cash-only account. But if you're in the right market, you can still make some good money - just have to play them more long-term. Good luck and let me know if you have any other questions.

Anonymous said...

Thanks as always Mac! You have always been very helpful. I have corresponded with you a few times even by email. I guess its hard to come to know by "Anonymous"! lol