Monday, October 19, 2009

State of the Market - 10/19/09

A nice bounceback session today on Wall Street, as stocks fought back against some early selling and were able to post nice-sized gains a session after some heavy selling on Friday. Stocks rose sharply and steadily for about two hours this morning, but then moved basically sideways for the rest of the session with a slight downward bias. Volume appears to be a good bit lower, even when not compared to the options expiration volume on Friday. That is the only problem I see with the action today.

Technically, I think it was important for the market to bounce back today from Friday's selling, especially when it looked like we might get more selling in the first fifteen minutes or so of trading. We are in a position where we are not that overbought and I personally believe the bulls need to show continued strength this week rather than just mess around here near the former breakout levels. I want to see follow-through quickly in order to trust that last week's breakout was the start of another nice leg up rather than a head fake. For now, continue to pay attention to the numbers I focused on in the video as they remain important technically.

In terms of sectors, the financials lagged the market today and that is a point of concern, along with the chart as I shared in the video this weekend. I would watch these guys closely as this continues to look like a potential failed breakout. Oil was higher as the dollar was lower - the interplay between the two continue. As it is, the dollar is quite oversold and continues to ride the lower channel trendline, so be alert for a bounce at some point soon.

From the video, CA** was the big winner today and I did enter that this morning at $11.14. It wasn't a perfect entry because it gapped up, so there was no chance to buy just as the downtrend line was broken, but with volume being heavy, I felt it was certainly worth the risk. Hopefully you were able to get into that today for a decent gain. G*** closed nicely but was very volatile intraday so I stayed away. Interestingly enough, there wasn't much else that moved today even with the nice gains in the overall market and that perhaps is a bit worrisome. C*** had a decent move of the pullback and could move higher from here, and U** reversed hard off of its lows and also could move higher from here, but the rest of the list was mainly flat for the session. There is one other stock I am watching closely here and thought hard about entering a position today, but it would be an anticipatory buy because it hasn't quite broken out yet.

Overall, the trend remains in place and as long as we hold above those key support levels on the S&P and Nasdaq, then you have to play the upside here. There are a few warning signs out there that could derail this rally once and for all, but until they present themselves more and in a serious manner, I don't know how important those signs are. Good luck Tuesday and take care.

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