Tuesday, September 15, 2009

State of the Market - 9/14/09

Another up day on Wall Street (am I sounding like a broken record or what?) as stocks shook off a slight pullback at the open and then did nothing but move steadily higher for the rest of the session, closing only slightly off their intraday highs. Volume looks like it will come in slightly higher.

Technically, the beat just goes on for the market. The Nasdaq and S&P chugged higher once again and this is really starting to look like a move similar to what we saw in July. The indices had a decent selloff in June, bounced up to their former highs and got overbought, but simply stayed overbought, going through those highs regardless in a slow and deliberate manner. That was similar to what we are seeing now. Everyone is expecting the pullback and it just never comes. I don't know what is causing this move - short covering, the government, performance anxiety from fund managers. It is probably a combo of all of those, but whatever it is, it sure is making the bulls happy.

As I showed last week, from a longer term perspective, we could continue to melt up toward 1200 on the S&P and 2150 on the Nasdaq without much resistance if we get over this wedging pattern. If I was a hardcore bull, however, that is what would have me worried. The Nasdaq tried to get out from its short-term wedge but couldn't today, and the S&P continues to sit right at the top of its wedge. Going back all the way to the start of this rally in March, the uptrend channel has gotten more narrow as we move higher, and typically these upward wedging patterns aren't very bullish. That's why I still think we have a significant pullback coming at some point soon. The problem is soon could be next week or it could be in two months. Overall, I guess the trend remains your friend but I would keep my stops quite tight on profits I have.

In terms of sectors, the XLF rose again today and that head and shoulders setup is looking less and less likely here. Maybe we'll see a double top as the former high is around $14.90. The divergences are still there - it hasn't broken to new highs yet and is lagging mightily behind the market, but right now, I guess it just doesn't matter. This is another example of how what I would call "traditional" technical analysis is not working as well as it has in the past in this market. Oil was up today and continues to just chop around it seems. The heavy volume selloff we saw Friday once again hasn't seemed to matter on a bigger timeframe. It basically looks like it's coiling here. The dollar is still holding that bottom trendline...barely.

In terms of individual stocks, I would be careful right now with these biotech stocks. I posted TSPT, SVA, MNKD, PLX, and JAZZ on the weekend video as possibilities, but none have acted well so far. SVA had a failed breakout today. MNKD made a weak breakout attempt. TSPT broke down all the way to its 20 day MA (it may bounce there for a bit however). JAZZ had two mediocre bounce days in a row. PLX had a mini-breakdown as well today, so overall, I would pass on the biotechs. I'll see if I find anything else in my scans tonight but ULTA, F, PCAP, and CATM are the only stocks left from my weekend watchlist as buy possibilities now. On the short side, BKE still looks interesting but I am still leery of shorting anything yet.

That's about it for today - best of luck Wednesday.


Anonymous said...

Mac, thanks for your insights! Could you provide your opinion on URE and VVUS? Thanks a lot! Elena

IEM said...

thanks for the recap! felt the same with the biotech today, too many eyes on those... interesting that some oil related smaller cap keep marching higher BEXP, PDS, PQ... a sense of lack of sellers in the air

Mac said...

VVUS - I don't really like the biotechs here but it is setting up in a volatile flag like pattern here, so maybe as a day-trade it could move higher.

URE - broke out today to new highs on higher volume - not bad, but quite overextended so I would probably wait to see if it rests a bit here.

Lee said...

Here is one I have been following for awhile and have taken a position...SGEN.

Your thoughts appreciated!

Mac said...

I saw SGEN in my scans tonight and put it on my long watchlist. It is sitting right at its 9 day moving average so it certainly could bounce here. Forming nice flag pattern.

I am hesitant on biotechs right here so I will likely pass but the chart itself looks good.