Monday, September 21, 2009

State of the Market - 9/21/09

We had a day of consolidating for most of the market today on Wall Street, as stocks opened weak and stayed weak throughout the day, closing with small losses except for a small gain on the Nasdaq. However, there were more bullish undertones to the trading as both the Nasdaq and S&P once again fought back against a poor open and closed somewhat off their lows for the day. Volume also came in below-average and lower than any of last week's sessions, which is nice to see on a day of selling.

Technically, I showed the possibility of short-term bull flags forming on both the Nasdaq and S&P over the weekend and that still holds true today. Right now, the consolidations we are seeing are bullish and remind me of what we saw back from July 23 to July 29 on both major indices. Back then, we moved slightly higher out of these consolidations but then just kind of ground our way sideways. We'll have to see if we do the same thing here. We remain at the top of or just slightly above the top of the wedging patterns so a significant pullback could always occur based on those resistance levels. As of now, I really don't expect one as much as I did last week, but I am not dismissing the possibility.

As for numbers, I will be watching 2103 and 1053 as short-term support areas for both the Nasdaq and S&P respectively. To the upside, we could some acceleration to the upside if the Nasdaq breaks above 2150, as it coincides with what should be important overhead resistance from the middle of '08. That number is a bit above the most recent highs, but that's what I will be watching. On the S&P, a mover above 1075 would take us to new highs as well.

In terms of sectors, we saw another slight bounce today in the U.S. dollar which is probably one reason the market is consolidating here and not moving up. UUP has a lot of resistance to deal with at $23 and is sitting at $22.84 today, so keep an eye on this. A move above $23 and all bets are off for a potential breakout in the overall market. Crude oil did what you would expect it to do with the move higher in the dollar - it gapped lower and stayed lower throughout the day, closing right at its rising trendline from February. This continues to coil and is an area where it should bounce. If it doesn't, maybe that will be a clue as well that the market wants to pull back more than it is letting on right now. Financials are also pulling back but holding the $14.90 area on XLF so they overall look quite good right now.

I did enter KONG today at $15.35 on the breakout - I didn't catch it at the breakout but went in later based on the heavy volume. It didn't close as I had hoped but we'll see what happens. I saw a few other breakout attempts that closed in the middle of their range today (SGMO, PWRD, ININ) so perhaps this was a trend today. With the market at the top of its wedge pattern, you may see a lot of whipsaws on breakouts here. Keep an eye on this. If we see breakouts working well, I know I will take that as a good sign for further market movement, but if they fail, then it could be problematic for the market as a whole. STAR was the only other stock that moved a lot from the video this weekend but volume wasn't that heavy until very late so I passed. REXX was the only stock I would take off the watchlist - the others look OK after today and just appear to be consolidating as of now. I am watching one particular chart very closely and almost entered today, but will wait for now.

That's about it - sorry for the lateness of the post but I had to go get a medical procedure done after work. The overall market looks pretty good here and therefore I am short-term bullish, but if the dollar keeps rising and oil breaks the support it is near, then my outlook will likely change quickly. I think those two areas bear watching this week. Take care and good luck Tuesday.

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