Wednesday, July 29, 2009

State of the Market - 7/29/09

A small pullback today on Wall Street, but similar to the previous three days, the bulls fought back a bit to reduce the damage overall. It was overall a very choppy, up and down session with a slight downward bias to it until the last hour or so of trading, when the bulls pushed both the Nasdaq and S&P back up close to their session highs and well off their earlier lows. Volume was a good bit lower on both indices.

Technically, I really don't know what else the bulls can ask for the past three or four days. Both the S&P and Nasdaq were obviously very extended at the end of last week, but so far this week they have rested nicely on lower volume and both look to be forming bull flags right now. Even more impressive is that if you look at each of the past four closes, they all came at the top of the daily range, well off their lows. This has allowed the market to work off much of its overbought condition - for instance, the McClellan oscillator is right back in the middle of its range, completely neutral. The 9 day moving average is creeping up nicely on the two main indexes, and should offer support if we pullback further, which is still possible. Numbers to watch in the short-term are between 956-963 on the S&P and around 1940 on the Nasdaq.

The only really negative technical development today was the oil via USO had a very bearish breakdown on heavier volume today. I am actually surprised the market wasn't down more with this move lower in oil. Commodities were hit today in most cases and I was stopped out of my ANR position from yesterday a little under $31 for about a 4% loss. This bears watching because as I pointed out in Monday's video, the U.S. dollar is in a spot where it could bounce and therefore hurt commodity stocks, which are still leading this market in some ways.

I didn't do much else today in the market - my only positions are ISRG and JDAS and I will watch one of those a little more carefully now after putting in small advances on lower volume the past two days. Overall, however, my outlook remains the same. Anything is possible, but this sure looks like a bullish consolidation the past three or four days, and as such, it makes sense to look for plays on that side of the market. I see a few that I like that are consolidating nicely - to be honest, not as many as I saw last week, but I haven't gone through my scans yet. I am still on the lookout for earnings plays as well - this is the right type of environment to look at those. Perhaps the oil breakdown will lead to more selling the rest of this week, but most evidence points to a continuation of this rally sometime soon. Play accordingly. Take care, and best of luck Thursday.

2 comments:

CW, Portland OR said...

You overlooked a very important event today. The T-Bill auction today was met with less than wonderful results...rates will rise as the government needs to fund all this debt. Please read further....http://www.cnbc.com/id/32201716

This will weigh on the market....

Mac said...

No doubt - common sense tells us that that event would be bad for the market. But what about a $6 drop in oil? What about China being down 6% or whatever it was? There was a lot of what I would sensibly consider bad news out there today and the market continued to shrug it off for the most part. I can't ignore that. All this news may catch up to the market eventually, but for now I still think the charts looks bullish.