Tuesday, August 18, 2009

State of the Market - 8/18/09

After getting beat down yesterday, the stock market bounced back a bit today on Wall Street, as traders pushed stocks up slowly and steadily throughout the session today, with very few pullbacks intraday. They leveled out a bit as the afternoon went on, but still closed near their highs for the day. The only problem is that compared to yesterday, volume was very low across the board and that is not what you want to see on a bounce back day.

Technically, it looks like we have just a relief bounce on our hands today when you consider that the lows of the late July/early August consolidation were not overcome today and that the market sat right below them the entire afternoon but not really making a run at them. Combine that with the much lower volume we saw today, and I have to assume that this was simply a relief bounce that could end soon. If I was more aggressive, I may even consider shorting this little bounce but based on the lack of nice short setups I am seeing, I will likely pass. The numbers I will watch are 992 on the S&P and 1962 on the Nasdaq as overhead resistance. If we get above those, then perhaps yesterday was a one-time thing, but as for now, I am still bearish short-term. I could see a bear flag forming on the two main indices with another day or two of light, flat trade, and if so, I may consider shorting it for a few day period. The 950 area is still my target on the S&P as I showed yesterday and if I am or was short, I would cover there.

Oil bounced back big today and continued its extremely volatile trading - today was the sixth time in the last fifteen sessions that USO had a move of over 3%. This move was in response to a drop in the dollar and that inverse relationship continues. UUP is under its 50 day moving average but is still looking like an inverse head and shoulder pattern to me - if it gets above the $23.75 area, then you are looking at another big move lower for the overall market. Other areas that gapped lower yesterday like retail and the financials bounced back as well today but on what looks to be lower volume.

I didn't spend much time looking at the market today and made no trades. It remains a very tricky market and one that is quite choppy, and because of that, I don't see a real edge here in terms of making a lot of trades. Less is more in my opinion right now. As I said yesterday, if we pullback into that major support area around 955 on the S&P, I will likely look at entering long there, but as today showed, who knows if that will happen? If the dollar is down tomorrow again, then the market might bounce right back up into its former range and chop sideways a bit more. All in all, there just isn't much to do right now, at least not much that would be profitable. The trades will come, but sometimes (many times actually) sitting out and doing nothing is the best trade to make, and I will continue to do that. Good luck Wednesday.

1 comment:

CW, Portland Or said...

No comments....we are all worn out. This market is very tiring. I'm short QID and TZA. Small position. i believe we are headed lower.