Thursday, August 20, 2009

State of the Market - 8/20/09

Let me start today's summary by saying that I was not watching the market at all today - I spent the day with my wife and two sons at the zoo and then Chuck E. Cheese's. So I will just share some thoughts that I have as I arrive back home and look at what happened on Wall Street.

Looks like the market was up once again today, as stocks rose early, consolidated for most of the session, and then rose once again as the final hour approached and closed with good sized gains for the third straight day. Volume was slightly higher on the S&P compared to yesterday (although still below average and lower than Monday) and slightly lower on the Nasdaq.

Technically, the gaps that looked like breakaway gaps to the downside on Monday have been completely filled and basically the market is back into its consolidation from late July. I did not expect this action over the past three days, but perhaps because I didn't think it would happen I should have expected it. Expect the unexpected, you know? I guess based on this action that I will go back to looking at 1018 on the S&P and 2015 on the Nasdaq as key resistance to the upside that needs to be broken before I would start looking to go long again. About the only difference we saw today technically was that the dollar and oil were both down slightly, ending the inverse correlation between the two, at least for a day. I am about as neutral right here as you can be from a technical standpoint because of the reentry into the trading range. I still think a pullback into the 950 area would be absolutely ideal for some longs but after the last three days, I don't know if it will be that easy.

Right now, I don't trust this market on either side and that is why I haven't traded this week. As I said last night, if we break out over the next few days to new highs, we will do so likely from slightly overbought conditions due to the straight up move of the past few days. It is looking like Monday was potentially a bear trap, and I am hesitant to believe that a break to new highs wouldn't be a bull trap as well. I don't know why I feel that way - I just do. It's just been a weird market this week and that's why I don't trust it. IBD put the market into "correction" mode on Monday and since then, we've been up each day. The market is seeming to continue its pattern of confusing the most number of traders as possible.

With tomorrow being options expiration, I will not be trading Friday as well. I haven't gone through my scans in much detail this week but plan on doing so tonight or tomorrow, and perhaps that will give me a better feel as to which direction this market is likely to head. The fact that I found very few long or short setups that interested me early in the week was another reason I felt it was best to sit this week out due to the possibility of chop. Perhaps I was wrong, but I don't sense that I missed a whole lot so far this week. Take care and best of luck if you're trading tomorrow.


CW, Portland OR said...

There has to be a direct correlation between the ZOO, CHUCKEE CHEESE, and the STOCK MARKET...seems like there's a good article there somewhere...

Heart of The Rain said...

I think market in consolidation phase as result of investors trightening their expectations and act very carefuly. In my opinion, these curency level are the best level to swing down, or it's a begining for the midterm/long term bullish, not clear yet where market will go.