Tuesday, October 20, 2009

State of the Market - 10/20/09

We did not see the most impressive follow-through to yesterday's buying today on Wall Street, especially in the face of good earnings from AAPL. Futures were up pre-market but when trading actually started, the market opened basically flat. They chopped around for about the first and a half of trading, but then a little before lunch there was a big drop. The indices were able to recover slightly from that drop and close off of their lows, but they still finished with losses. Volume looks like it will be heavier and if it is, that would be another distribution day.

Technically, we continue to hold above the 2150 and 1080 levels on the Nasdaq and S&P respectively, although the Nasdaq was tested today. That is bullish and as long as we continue to do that, it is hard to get super bearish about anything. That being said, I would like to see some follow-through to last week's breakout and we still haven't seen much in my opinion. Perhaps this is just due to the news-driven environment we are in, but I think the longer messing around in this area, the higher chance of this breakout failing. Continue to watch those numbers carefully.

There was a rather large bounce in the U.S. dollar today from the bottom trendline of its channel and if this bounce gets follow-through tomorrow, then we will likely see more selling. As I said in the weekend's video, we are in a technical position that a bounce could happen and certainly sentiment is very poor right now for the dollar. Keep an eye on this as well. Oil pulled back a bit in response but is still in a strong uptrend. It will take more than one day of selling to end that.

I entered CBAK this morning at $4.68 as it broke above its pennant trendline - that was the stock I was thinking hard about yesterday. Unfortunately, I got whipsawed here as it went back below that trendline pretty quickly and I was stopped out around $4.46 for a loss. I was also stopped out of CAAS around $11.80, although this was just a case of tightetning a stop too much. When I saw the early weakness, I tightened it and then got whipsawed out of it as well.

Usually, it's not a bad thing to get stopped out of positions - usually it happens for a reason - and that could be the case today. Going through my watchlist, I am seeing some slight breakdowns in charts that were looking fairly strong and that is worrisome. GOL shouldn't have a breakdown like today, even though it finished off its lows. MDZ and SVA had some breakdowns as well today and I thought both of these charts looked good to start the week. We will watch carefully to see if these breakdowns are a sign of things to come over the next few days.

I'll try to get through my scans tonight to check for any other breakouts. If I see some, then I may get more defensive, but as of now, the trend remains in place so you have to play it that way. Take care and good luck Wednesday.

No comments: