Monday, August 3, 2009

State of the Market - 8/3/09

A good day for the bulls on Wall Street today, as stocks started higher at the open and stayed higher throughout the day, closing near their highs for the day. It was somewhat of a choppy session, but had an upward bias throughout. The only negative was the volume came in lower on both the S&P and Nasdaq (quite a bit lower on the S&P) and just about average overall. That's not what you want to see as the market breaks to new highs for the year.

Technically, the numbers I put out this morning as important were 1000 on the S&P and 2009 on the Nasdaq. We closed just above that important psychological number on the S&P, and the Nasdaq closed almost exactly at 2009. So although today was a nice day, it wasn't as powerful a move as we could have hoped for given the circumstances - ideally you would have liked to have seen those numbers clearly taken out. As it is, we'll see if we get more movement upward tomorrow that would allow us to clearly move to new highs. The financials via XLF gapped above resistance and also closed at new highs for the year around $13.35. Again, the only problem with this is that volume was lower today. Maybe it doesn't matter with an ETF but I'll be watching it nonetheless. If they keep moving higher, I think the market would have a hard time not following along.

It was kind of a weird day from where I sat as something just didn't feel right for most of the session. It seemed like more of a melt-up than anything and because of that, I didn't make any moves. I saw some stocks like PZE and SPF breakout but on subpar volume(although SPF closed on higher volume so some must have come in late - it did lag most of the day). I saw more stocks fade breakout attempts like TNDM, an IBD 100 stock, and close in the middle of their range. The only stock that I really liked from my earlier watchlist in terms of how it acted was CLWR, which did have a nice, higher-volume breakout. So for me, it was a day to do nothing as I didn't trust the action, even though on the outside it looked very positive.

Another reason I passed on several names is that when checking the news, I noticed that several of my possible plays had earnings reports mid-week, and I NEVER like to step into a position right in front of earnings. There is a casino that is set to open soon here in Pittsburgh and I would be much better off taking my money down there than buying a stock right in front of an earnings report, so I had to pass as well on CSIQ and EXM, both of which I thought looked decent.

We'll see what tomorrow brings and if the bulls can keep this going the rest of this week. I don't like the volume today but am fully aware that the market can go up without, especially in August. It is not a healthy pattern, but the old rules don't seem to be working as well as they once did, so whereas before it might be a warning sign, who knows right now? I am certainly not looking to short right now, but I am going to patient here with potential longs. My favorite setups as of now are POL, VNDA, TBI, and BDK. Those patterns look good. I'm not seeing that many more right now that excite me - we'll see if I find some in my scans later. That's about it for today - good luck Tuesday.


positiontrader said...

Hi Mac!

How does the McClellan oscillator look after today? Could you please put up a chart of it whenever you get the time.

Thanks!! Appreciate it.

Mac said...

It's at 203, so slightly overbought here but not totally extreme. I wouldn't be surprised of a pullback sometime (bull trap tomorrow??) but it doesn't have to happen.