Tuesday, December 1, 2009

State of the Market - 12/1/09

A nice strong day today on Wall Street, as futures were up big in the pre-market and stocks stayed strong throughout the rest of the session. After running for the first five minutes or so, they did pull back, but righted themselves quickly and rose slowly from there, holding intraday support several times. However, upside resistance was tested several times as well so for now the market is still locked in a range. Volume appears to be heavier which is a good sign.

Technically, the big number on the S&P is 1113 and the market bumped up against that number several times today without being able to get through. Perhaps it just needs another day to do that - the consolidation is bullish overall but bears watching in case we reverse here. The Nasdaq broke about a slight downtrend line today but is lagging the S&P in that it is not close to new highs yet. As I've mentioned several times, that along with the Russell 2000 continuing to lag is a negative divergence, but we've seen those divergences for a while now.

The dollar was lower for most of the day and that caused oil to move higher. Financials continue to lag the market as they were flat for the day - not a good sign when you consider the gains in the overall market. You would normally expect this to cause problems - the market typically needs financials to move higher - but as I just said, this market has ignored so many negative divergences up to this point that it may just do that again with XLF.

I bought TSTC this morning at $13.70, anticipating the breakout that did come. However, that was my only trade of the day. I am kind of kicking myself because I did not go through my scans last night and in hindsight, with all the China stocks that were moving yesterday, a simple look at my China watchlist in Telechart would have given me more ideas for today. From the weekend video, CAAS, CYD, and TSTC have all moved very nicely, but CAGC, HRBN, and WATG all had moves today that would have been playable if I paid better attention. That's what being in a losing streak does - you tend to slack off a bit in your preparation out of frustration and then you end up missing opportunities.

Overall, we have to see if we can break out on the S&P over the next day or so - 1113 proved to be formidable resistance today and I assume it will be tomorrow. A move above that could accelerate the rally, but I would really like to see the Nasdaq, small caps, and financials catch up and join the party before getting heavily invested. A reversal back into this trading range here remains a strong possibility, especially as these momentum stocks get a bit too extended. Right now, I think being careful remains a smart play, although if you're nimble, the momentum plays may continue working (short-term plays only). Good luck Wednesday.


Anonymous said...

Mac. could you check APWR for me? I wonder if it has turned bearish or it is just consolidating. Thanks a lot! Elena

Mac said...

Hi, Elena. APWR is a very strong stock now and is due to pullback like it has the past two days, but as long as it would hold around $14.50, I think you hold on for more potential gains. A lot depends on where you got into at. I wouldn't buy here - wait for a little bit further pullback. But if you have a position, maybe let it run a bit because these China stocks are certainly hot. They are volatile and can have wild swings. Hope this helps.