Thursday, November 19, 2009

State of the Market - 11/19/09

We saw a down day today on Wall Street, as stock sold off very sharply for the first hour or so of trading, paused for a bit, and then fell to new lows before lunch. From there, it climbed slowly and steadily off its morning lows, but still finished with large losses by the time the closing bell rang. As of now, volume looks to be lower on the S&P but higher on the Nasdaq.

Technically, today could be meaningful because three week uptrend lines were broken today on both the S&P and Nasdaq. In addition, key breakout levels around 1100 on the S&P and 2190 on the Nasdaq were broken today to the downside as they could not hold as support two days in a row. Does that mean we sell off tomorrow and get follow-through to the downside? Normally I would say yes - we could be looking at a failed breakout attempt here. We however are not in a normal market, not by a long stretch.

S&P 500
Nasdaq

We all know (or at least I do - maybe it's just me) how well technicals have worked recently and I tend to think today's selling may have simply been some game-playing before options expiration tomorrow. There is no way of knowing for sure however so I am still open to anything here and really remain without a good feel for things. Having been burned so much over the past few months trusting technicals, I have a hard time putting any faith in the pierced trendlines and broken support today - that's all. A big part of me thinks it may have just been a fakeout to try and reignite shorts to add fuel to another bounce up.

As it is, divergences remain all over the place so there are certainly reasons out there for the market to fall further if it wants to do so. No volume on the most recent move, negative divergences on several indicators, lagging small caps and financials - I've pointed them out many times here the past few weeks. I noticed today that GS (a bellwether for this whole rally) has lagged tremendously as well over the past few weeks, never rising above its 50 day moving average even with the S&P moving to new highs. AAPL broke down a bit today as well on heavier volume - another bellwether that couldn't break to new highs when the market did. Maybe these leaders breaking down would throw another log on the bears' fire, that is if they ever have enough confidence to ignite it.

I remain totally in cash and don't plan on doing anything tomorrow with options expiration occuring. I continue to just have little faith or confidence in any of the things that happen or signs I see just because of the past few months, and it will probably take those historically correct indicators and signs to start working again before I put my confidence back into them. There haven't been many individual setups anyway over the past week, so maybe it's for the best that I remain in cash. Overall, I think it may be the best play right now. Good luck Friday and take care.

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