Monday, November 9, 2009

State of the Market - 11/9/09

Well, it looks like we are going to get a repeat performance from July, September, and October with this market, because stocks today once again threw to the side all the bearish signs out there and just rallied higher throughout the entire session. Stocks gapped slightly higher to open the session due to a weak dollar and from there just worked their way steadily higher, closing at their highs for the day. Volume appears to be below average but above Friday's poor levels.

Technically, I really don't know what to say. Perhaps the reversal on the dollar last Tuesday was the clue that this market was ready to bounce straight up once again, but that was it. As I showed last night in the video, there were tons of negatives and very few positives from a strictly technical perspective with this market, but it doesn't matter. The weak dollar was the story today and it looks like we could be back to the weak dollar, strong market play.

The S&P climbed back above its recent former trendline today and the potential head and shoulder pattern looks now like it's voided. For the Nasdaq and XLF, the pattern is still out there but after today, I don't think it will work, just like it didn't back in July. Highs for the Nasdaq are at 2190 and for the S&P are at 1101 - it looks like those will be challenged if not broken through soon.

I was stopped out of my SRS position early on today at $9.83 for a small loss and am back in cash. I am glad I haven't gotten heavily short this past week, although the small losses from continued test positions do add up over time. Unfortunately, as I go through my scans, I see virtually nothing that looks interesting to buy - the charts just aren't there right now, at least not the type I look for. CTDC, HGSI, and SLH are the best I can find right now.

Overall, it looks like the beat will go on for this market, and I have no problem admitting I am clueless about things anymore. I've always tried to be completely honest on this blog, and I am being honest when I saw I just don't know what is going on. Everything I learned and believe as a price/volume, IBD-style technical trader seems to be getting thrown out the window. I believe IBD will put the market back in rally mode today after moving to a correction a week or so ago. They are the experts and yet this will be the third or fourth time in a row their system has basically been whipsawed.

Right now, I just am at a loss for what works besides buying every dip blindly and use ETFs to do so. Even buying individual stocks is a difficult task because they have become so volatile that normal stop-loss levels don't work as they used to, so you get stopped out before the stock makes its big move. I hope I don't sound bitter here - I really don't intend to sound that way. Confused would be a much more accurate description of how I feel. Perhaps in several years I can look back on 2009 and say I learned an important lesson from it in regards to trading.

To wrap up, although I feel a little weird for putting this on here, I feel it's worth it. I read this today on the comment section of a TechTicker post on Yahoo Finance and thought it was well written and well thought out. And as I try to find a clue as to what is happening out there, this made some sense. Good luck Tuesday.
"Rick - Monday November 09, 2009 10:49AM EST

I THINK I FINALLY GET IT! I have been scratching my head trying to understand … Good news, market goes up … no news, the market goes up …. bad news, the market goes up … how can this be possible. Logic says that smart people would be getting out when stocks are as overvalued as they are today. Then I talk with people and find out that the smart people are out of the market. The normal people are just letting their 401K go with the flow (and still contributing), and the dumb people do not have any money to be in the market. BUT the part I had not been getting is that the investors, banks, speculators, etc … all have free money with no risk (thanks to Obama). This market is not a market of earnings and performance; it is a market of government induced greed from free money! Each of them are feeding the market the billions of free government money … the value of stock has nothing to do with it. I guess the question becomes … when do they run out of free money … when will Uncle Sam shut off the printing presses … OR Is this the future, the stock market always rising because the government will not let it fall (too big to fail) … A subsidized market that will insure peoples 401ks are there for their retirement and replaces the Social security system (think justification) … A giant, never ending, government run, ponzy scheme … NOW I am thinking …. If I was smart, I’d be back in the market. The true indicator of when it is time to get out is … When will the government free money stop flowing."

Does this make rational sense to anyone else, or am I going crazy?


Richard said...


For the longest time I have been rambling about how I have lost all trust in the true validity of the market, and that it seemed like it was being completely manipulated by big hedge funds or banks so that they get what they need and want.

That comment you found really got me thinking.

Anonymous said...

Hi, Charles Kirk posted a link to this and it all resonates for me...but I have a pet theory on what else may be driving the market: mattress money. We've just had enough of a pullback so that those who've been watching the most despised rally ever from the sidelines finally plugged their noses and jumped off the diving board today...and perhaps every day they think a pullback has fizzled.

Anonymous said...

Have no fear, just before they stop the printing presses, they will impose the trader tax to make us all buy and holders.

Anonymous said...

Even though today was another huge day, I am still seeing this: the Dow made a new high and the naz 100 didn't, less stocks participating, oil was horrible even though the dollar collapsed, the dollar still needs to break down and could put in a u shaped reversal tomorrow, less stocks above the 50 day moving average, many areas better play catchup soon like financials. Any selloff on high/increasing volume won't bode well. I said we could see more upside today, and we did, but many concerns still exist and none have been resolved. If the divergence today in the dollar and oil continues, watch out, because if oil collapses, and
the dollar reverses, the financal sector performance isnt there to hold up the market. I'm not trying to be bullish or bearish, because one should be long as long as the market heads higher. But just because my car can still drive, doesn't change the fact that I shouldn't ignore the oil and smoke coming out from under the hood.

Kirk said...

I was linked here from Charles Kirk's post and was wondering why, as a trader, you would be paralyzed by sentiment when the technicals look so good. Also, CTRP charts very similarly to CTDC. Any reason why it wouldn't show in your screens? Thanks.

Upsidedownunder said...

The resurgence today was expected, looking for a classic head and shoulders pattern, although maybe it was a bit stronger than foreseen. However, let's keep in mind your previous comments that a blow-off top was a possibility as well. Given that volume was still low there were probably a lot of retail buyers jumping in without the institutional participation. A double-top/head & shoulders with a high right shoulder is still something to watch for. With a few more days to develop and depending on the news, this Friday/next week could be spectacular to the downside.

Mac said...

Exactly what technicals are you seeing that "look so good"? Just curious - all I see is heavy volume selling, light volume bounces, breaks of seven months trendlines, lots of damage on individual charts. What technicals are good?

Mac said...

Also, for CTRP, on October 30, it broke its 50 day moving average on very heavy volume, a sell signal. It's bounced back on lighter volume, but I don;t see any similarity between CTRP and CTDC. CTDC is forming a nice flag pattern on bullish volume patterns.

To the anonymous commenters, I agree with your thoughts and I have had many of those thoughts myself. However, this market is completely irrational (even more so than usual) and all of those things probably just don't matter. I think there are so many traders thinking those same things that we just get short covering over and over again, which is what we saw today.

Kirk said...

thanks, Mac. I was just showing my ignorance looking for an education. Every little bit helps a greenhorn like me.

Mac said...

No problem Kirk - hope I didn't offend you or anything - wasn't meaning anything by my comments back. Feel free to ask questions at any time.