Wednesday, September 16, 2009

State of the Market - 9/16/09

I really don't know what else I can write today that is different from what I said yesterday, so this post may be short. This market refuses to do anything but grind its way higher, while leaving bears in its dust, and we saw much more of that today. It was pretty much a straight shoot higher throughout the day, and volume looks like it will come in higher than yesterday.

On a technical level, the financials staged their breakout today and have completely voided the bearish patterns they were setting up for the past week or so. This is another example of a bearish setup with negative divergences that did the exact opposite of what "normal" T.A. would suggest. The finnies are obviously overbought but so is everything else (McClellan is at 227 as I write this), so maybe it will continue to just not matter. My guess is they were the main reason the market was up so much overall today because I didn't see much else moving overall.

The S&P broke above the upper trendline of its wedging pattern today so the chances of us seeing a real ramp upward here (a possibility I've mentioned for a few days now) seems more likely. The Nasdaq went above a short-term wedge yesterday but is now right at the top of the longer-term wedge from the March lows. It will be interesting to see where it goes from here. 2150 will also be an interesting number to watch if it the Nasdaq gets that high, as there should be much overhead resistance in that area from important lows in 2008.

I watched the market this morning with a small list of stocks that interested me (F, PCAP, CATM, and a few gold stocks) but nothing triggered and I remain in cash. The gold stocks gapped up and I did not feel comfortable chasing the gap. I think the lack of great individual setups (in numbers) is what really has made this market so tricky, at least for me. I have had days where there were a few nice setups, but it's seemingly been a long while since I have had over 10 or setups that I entered the next trading day interested in. You figure that if the market was ready to make another move higher it would have a lot of great individual setups but it just hasn't. Oh well. The weird thing is is that the last time I saw a TON of great setups was back in June when we ended up topping out for small period of time.

I said yesterday to just ride the trend if you are already long but be aware that this thing could turn in an instant and get very nasty. I think that remains true and is the best advice I can give. If you aren't invested, we are quite overbought so buying is risky. There are a few patterns that are still setting up (KONG, KEX, ENER, ININ) and entering these on breakouts may pay off, but the risk of buying here is seemingly high as the market starts to go parabolic.

I am still disappointed that I have missed pretty much all of this run - either by getting stopped out of positions too early or passing on setups due to the way the overall market looked - but it is what it is. Perhaps this is my inexperience overall showing up as I wasn't trading back in 2003 at the start of the last bull market or in 2000 when the Nasdaq was running skyward every day as well. At least I haven't been shorting this thing and losing money, I guess. I don't plan on doing that either until we get a clear breakdown and a bounce that doesn't work (for once). Who knows however when or if that will come? I am done guessing. Take care and good luck Thursday.


Fabrice said...

Many thanks for your work and advices. I'm still a beginner at this game and without reading your posts I would have shorted this market several times .... I also appreciate to hear a little about what is happening in your daily life - nice touch... If ever you plan some vacation in central europe let us know, maybe I could payback some of what I received from you.

Anonymous said...


Have this gut feeling that they are ramping this market up for this Friday expiration...

Lets see how Q3 earnings will be. Today, if you ask many investors/traders that if market dips, will you buy ? Most certainly yes.

This is where the danger lies.

Mac said...

Thanks Fabrice. With two kids, I don't know that I'll be venturing to Europe any time soon, but if I do, I'll take you up on your offer.

Anonymous - options has crossed my mind and how that will play into this ramp up. My gut has been quite wrong for about the last month so I don't listen to it, but I do feel at some point this thing will correct very sharply and catch many people by surprise.