Thursday, September 17, 2009

State of the Market - 9/17/09

We saw a slow day today on Wall Street, and really, that's not a bad thing considering the way this market has moved up over the last few weeks. The market opened flat, but tried to move higher again early on. After a quick pullback, they moved back to their morning highs, but could not break through and fell from there through most of the afternoon until around 2:00. They bounced back up into the close, with only a late pullback preventing the indices from closing flat. Volume appears to be lower than yesterday.

Technically, we saw some rest today and that is healthy and completely normal. Actually, about a week of this type of action would be absolutely perfect in that it would let the market digest these recent gains, but I somehow doubt that is going to happen. The technical picture I've been painting for the past few days remains the same - we are at or just above the top of wedging patterns on the indices starting back in March and although these are typically bearish and a pullback would make sense here, a real acceleration of this latest move leading to a potential blow-off top is just as likely in my opinion. The McClellan pulled back a good deal today (back under 200) so it does seem like these little pauses or sharp one-day selloffs are doing the job at relieving overbought conditions.

The U.S. dollar was up just slightly today but oil was flat. Keep watching these two as I continue to believe they are controlling a lot of the direction we are seeing in this market. The dollar is now below the shorter-term channel I've shown here before but may get some temporary support around $76. Longer-term support, however, doesn't come in until around $72 (around $22 if you're tracking with UUP) so if that $76 area falls, then I could see a very sharp move lower that would likely push the overall market sharply higher. Keep your eye on this.

I didn't make any moves today although I continue to keep my eye on a few stocks like KONG and ININ. There really aren't that many more however, and one I was watching (F) has not acted well the past two days so that may be off the list. I am still not looking to short but will point out that STEC had a huge breakdown today and with a bounce could be very shortable in a few weeks. I have pointed this chart out over the past few weeks many times due to its many negative divergences and today those divergences played themselves out I guess.

I did see that CVGI was up another 10% today, which really stinks for me. That was a chart I also consistently pointed out here before last week and when I bought into it at $5.10, my stop was run and now I am looking at a stock up 40% in a matter of days that I was stopped out of. If I could summarize my year in one example, that would be it. I have had good stock selection, but poor trade management combined with perhaps a little bad luck, and it continues to be beyond frustrating. About the only thing positive for me this year is that my patience in some ways has improved in terms of not overtrading and forcing things. I realize now that I don't have to make trades to be happy, entertained, etc. and I think that is an important step for a trader.

Tomorrow is options expiration and of course, anything can happen on those days. I think that really holds true at this moment, as a big selloff would not surprise me in the least. A parabolic move higher would also not surprise me in the least. As I said yesterday, if you're long, I would stay long until we see some clear signs that this run is over, which haven't come yet. They may come very soon however, so be ready to switch your outlook on a dime. Just like the market switched suddenly in March from extremely bad to extremely good, I am thinking it could happen again (in reverse obviously) whenever this move eventually tops out. Best of luck Friday.


Anonymous said...

Hello Mac:
Have not made a comment in a while.
First things first, Go Steelers Go and Go Pens Go as the new season begins.

Here in Toronto we are perpetual doormats.

I am not so sure its the market that is any different perhaps its just our perception of the market that is different.

If we just traded (me included)what we saw in the charts, we should have been on board for this run from March.

I was not, and I for one must stop telling the market what to do and start doing more of what the market is telling me.

The past month, I have been trading long (small positions and very quick with the sell button), and with each trade, I keep asking myself how long can this keep going?

I will keep going long until it does not work any longer, why sit on the sidelines waiting for a reversal when the stocks keep going up.

As always, cut any losers quickly.

enjoy your comments,


Jeff said...

Mac -

First, thank you for your daily summaries. Second, I echo your sentiments exactly regarding the frustrations. I've nailed my selections however my execution (stops) killed me, either too tight or too loose. CNXT, HERO, AXL for example - either stopped out prematurely or failed to have the patience to let rid. I'm not sure how to get around this except stick to the plan. But this extremely overbought market makes it incredibly difficult to trade. Thanks again!