Thursday, August 6, 2009

State of the Market - 8/6/09

Another day of rest for the stock market today, as stocks started a good bit higher but started selling off almost immediately after the open. The selling lasted for about 45 minutes before a bounce occured, and the rest of the day the market kept that pattern going of pulling back and then bouncing up slightly, all with a downward bias. By the end of trading, stocks did finish slightly off their lows but with losses nonetheless. Volume looks to be lower on the S&P but possibly higher on the Nasdaq - I don't have the final totals.

Technically, today was a day that saw the S&P try once again to crack that 1008 level that corresponds with the November '08 highs but once again, it couldn't do so. Resistance is become quite clear then, which is good, and it is possible the S&P is consolidating a bit, which is healthy. It is sitting very close to its 9 day moving average around 992 and should have support about 10 points lower as well around 982. The Nasdaq is showing a little more weakness that the S&P, with a slight break below its 9 day moving average today. With the heavier volume, we've now had two back to back distribution days on the Nasdaq and that typically is a warning sign.

I said last night that I am leaning more and more to a decent pullback soon, and a few other things I saw today flashed more warning signs. Both of the past two days, the Nasdaq has led to the downside and given its status as the leading index on the move up, that is not a good thing to see it moving down faster than the S&P. The financials closed off their highs and finished slightly lower, which isn't a big deal, but they did have massive volume today compared to the past few days of upward price movement and that's interesting. I saw some slight breakdowns in stocks that have been setting up nicely such as MKSI, ELGX, OREX, and GOK. Nothing crazy, but interesting. I also saw some earnings plays from yesterday such as WFMI, SCLN, and GRMN give back WAY too much of their gains today (in my opinion) and that is not good either. Finally, watching FUQI (an IBD leading stock) put in a gap (possibly exhaustion) but finish in the bottom half of its trading range strikes me as a possible blow-off move. We'll see if these things mean anything I guess.

Although I watched CSIQ put in a nice breakaway earnings gap this morning, I didn't make any moves other than to get stopped out of JDAS around $20 for a breakeven trade. It hasn't done anything since earnings but I will keep it on the watchlist. Right now, I don't see any point in taking on risk here with the market extended and fewer nice charts showing up. I thought about CSIQ but with earnings plays in general not working that well this week, I passed. I am once again completely in cash and not disappointed at all. A lot of this has to do with leaving for vacation tomorrow and not wanting to be heavily positioned one way or the other.

We'll see what happens tomorrow on the jobs number but there was a subtle change today in that the bulls for once couldn't push stocks back up near their intraday highs by the close. If this continues, it suggests that they perhaps have run out of steam in the short-term and we are due for a bigger pullback. No one can blame them - they've had quite the run - but a pullback would be good here for the longer-term outlook. A move down to maybe 1870 and 950 on the Nasdaq and S&P would likely set up some nice bases and allow this market to prime itself for another run up into the end of the year. So although I am short-term more bearish, I am not saying that this market is going to tank now. Heck, we may up 200 points tomorrow, as crazy as this move has been. I will be looking to buy a nice pullback if we get one.

Best of luck tomorrow and next week - I will be on the road driving to the Outer Banks of North Carolina for a week-long vacation so no posts tomorrow and next week will be light. I will have my laptop and can answer any emails or comments you may have, but I won't be putting any videos together and will be commenting on the market maybe only two or three times next week. With all of the free information given here each day, I think I deserve a little break. Take care and good luck.


IEM said...

Thanks for all the analysis. You deserve the break! Have fun!

Joel said...

Thanks for your market analysis; I find it to be very helpful. I hope that you have a great vacation with your family.