Monday, November 16, 2009

State of the Market - 11/16/09

Another new low for the dollar, another new high for the stock market. That statement pretty much sums up today's session on Wall Street, as stocks started the day higher at the open and added to their gains thanks to short covering as the session progressed, finishing a bit below their highs for the day. As has been the trend recently, volume appears to be anemic and well below average, at least on the S&P. On the Nasdaq, volume was closer to average but it looks to still be below as well.

Technically, I don't think anything matters right now. Technically, this market should have gone down many times and it just doesn't. Normally, you would think that means we have a super strong market, but super strong markets don't go straight up on way below average volume. I continue to be at a loss for why this market keeps going up but the theories I shared last week seem to make more sense to me as this goes. I'll probably figure it out just in time for the market to start acting "normal" again (by normal I mean based on historical tendencies). The longer this goes, the more it looks like a anti-dollar rally driven by cheap money, government intervention, and short covering. That's it - wash, rinse, and repeat.

For what its worth, there continue to be all sorts of negative divergences out there. Moneystreams on both the Nasdaq and S&P are continuing to lag price and volume continues to remain below-average - since November 2 (the start of this most recent rally), neither the Nasdaq or S&P has seen a day where volume to the upside was above (or in many cases even close to) its 50 day average volume. The financials and small caps continue to lag here as well. Does any of this matter? Probably not.

The dollar is all that matters, and it broke to new lows today for 2009. Once this happened this morning, you saw shorts start to cover and therefore we had another new high for the year on the indices. That's about it - I don't know what else to say from a technical perspective. The bottom line is that this has been a pretty bad few months for technicals and as a technical trader, that makes it rather hard to be successful.

I was stopped out of all my inverse positions early on in the session - SRS at $8.87, SDS at $35.98, and QID at $20.67. All gave me small losses. I don't know if I can say I am becoming used to these losses as the losing streak goes, but it could be the case. They don't bother me as much any more, which I don't know is a good thing or a bad thing. If it was just losses on shorts, I might feel less apathetic, but even my longs haven't worked so it just is what it is.

I wish I could buy here but as I said earlier, as a technical trader I see virtually nothing that makes me think buying here is smart. That doesn't mean we can't move higher, because we likely will, but what I have used in the past to make trading decisions is not working right now and it is tough to give up on what has worked historically so well and just "buy blindly" which, when we look back on 2009, will probably be listed as the best performing strategy out of anything. There are a few stocks on my list like FSYS that moved today, but I am just finding it hard to buy here. Not a ton of candidates and only a "theory" of why the market keeps moving higher to go from. Luckily I continue to not get very agressive on the short side, but after today, I am in cash and will likely remain mostly there for the forseeable future.

Good luck Tuesday - if the dollar keeps heading lower, I would fully expect to see more low-volume gains caused by short covering. If you want to play, feel free. Take care.

1 comment:

positiontrader said...

Hi Mac!

Hang in there!! At least they are small losses, though I understand they add up. You gotta stick to a trading style that you know works best for your personality and philosophy. If you dont mind sharing, what's your overall return (% obs) for the year? I know you have had many small losses but I remember you having some big winners last earnings season too. Thanks!!