Thursday, August 27, 2009

State of the Market - 8/27/09

Based on only the closing numbers, today would seem to be pretty boring to a casual observer of Wall Street, as stocks were up only slightly across the board. However, it was quite a bullish session when you consider the intraday action we saw. Stocks sold off hard for the first half-hour of trading, which took them below their former breakout highs, particularly on the Nasdaq. But after about an hour and a half of consolidation, the bears could not push stocks any lower and from there the market bounced hard all the way into the close. There was a brief pullback as the final hour started, but even then stocks bounced a bit in the final few minutes to finish close to their highs for the day and in the plus column. Volume appears to be lower than yesterday as of now.

Technically, the support I've been mentioning this week around 1018 and 2015 was tested this morning (in a severe manner on the Nasdaq) but did hold by the close, and that is important. When you also consider that both the S&P and Nasdaq bounced off their short-term 9 day moving average today, it was a very bullish session overall. I mentioned yesterday that we could just be consolidating here and action like today gives credence to that idea. Another few days of rest would be good, but to the upside the numbers to now watch are 1037 and 2040. If we climb above those, then we are probably looking at another leg higher, as hard as that is to believe.

There was a major bounceback today in oil, which was down early but then reversed much like the market to finish higher. On the other hand, the dollar fell so the overall theme of dollar weakness, oil strength = market strength continues to be pretty reliable. Financials also bounced off some support today and appear to be forming a nice little bull flag. All of these are good signs for the overall market.

As I started back to my full-time job today, I did not make any trades and actually need to catch up on my scans tonight to see if there are any nicer charts setting up from this week as I've been slacking a bit there. Right now, things are back to looking bullish. Perhaps the words I wrote yesterday about a pullback in this area being too obvious are playing out. Sentiment did seem to be extremely bullish and we have gone up a large amount already and low-quality stocks were popping out of nowhere (all signs seen typically near tops), but maybe too many people saw those thing as well. Now, maybe the market is going to do the opposite of whatever everyone expects. I certainly expected a pullback soon for a number of reasons I have written about this week, but after today I have my doubts. The bears continue to show absolutely no strength. This remains a market where you have to expect the unexpected and be ready for anything. That "anything" now may be another move higher.

Tonight, I hope to get through my scans and see if there are some nice setups out there, and I will attempt to share any I see in a video. I don't see myself trading a ton tomorrow, but if I find some setups, I may have to at least consider some longs after today's bullish reversal. At least I haven't been trying to short here, I guess. Good luck Friday.

No comments: