Tuesday, November 3, 2009

State of the Market - 11/3/09

We had a choppy, choppy session today on Wall Street, but overall a slightly bullish one as stocks fought back against early selling to finish slightly higher on the day. The U.S. dollar was up big pre-market and with that, stocks opened lower to start the day. However, the dollar traded lower throughout the rest of the session after attempting to break above its 50 day moving average, and stocks responded by moving slightly higher in a volatile manner throughout the rest of the session. Volume appears to be lower overall.

Technically, just based on the charts, it continues to look like the market wants to bounce here as the Nasdaq hold 2040 fairly well and the S&P has yet to even test its October lows around 1020. The market is still quite oversold (McClellan around -260) so a bounce would not surprise me. This is even more true based on the U.S. dollar not being able to get above its 50 day moving average today, although it could just need a bit more time before really breaking above it. If the dollar pulls back further, I fully expect to see a nice bounce, possibly up into the 2100 area on the Nasdaq and the 1060 area on the S&P.

I didn't make any moves today and remain totally in cash - I am going to go through my scans tonight to see if there are any possible pullback plays that look good. I would only play these on further pullback in the dollar, and more than likely I won't be going into anything too heavily. At the same time, if the dollar clears today's highs, I won't hesitate to get short and perhaps heavily short as I still think this market could get hit hard if the dollar spikes and looks like it is really bottoming over the short-term. It (the dollar) could be putting in a bottom here, but it will likely be a process, much like the topping process takes a few weeks for the overall market (perhaps what we are seeing right now).

That's about it for today - things don't look that much different from yesterday. With the Fed due to make a decision on interest rates tomorrow (I believe) we are probably in a bit of a holding pattern. The wording of their statement will likely have a huge impact on the dollar and with that the overall market. If they hint at raising rates at all, I think you see a breakout in the dollar and a 2-3% down day for the markets, maybe worse. If they state clearly that they will not be raising rates at all, I think the market takes off for a 2-3% move to the upside. Unfortunately, I can't tell the future, and I don't want to guess what they will say ahead of the statement. Again, that's why cash looks good to me right now. Take care and good luck Wednesday.

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