Monday, December 14, 2009

State of the Market - 12/14/09

We saw a positive start to the week today on Wall Street, as stocks started up and stayed up throughout the session, although it seemed to be a slow day once again intraday with volume coming in lower once again. Stocks gapped higher, pulled back and then rose to their highs for the day a little after noon. They pulled back a bit from there but started climbing again around 1:30 and kept climbing slowly throughout the rest of the session. Stocks, however, really couldn't break to new highs for the day and still have yet to break through key overhead resistance.

Technically, the numbers I showed last night in the video and have been discussing seemingly forever still remain in play - 1115 to 1120 on the S&P and 2215 on the Nasdaq. Until they are broken on a closing basis, we remain locked in the trading range. I still believe we need some sort of catalyst to get us out of this range, as volume continues to shrink and intraday action continues to be quite boring. Shorting might be a very smart play right here with a tight stop as the possibility of the trading range continuing remains high in my opinion.

I made no moves today and still hold VISN long and SDS as a hedge. There were some nice moves from stocks shown in the video last night (TSTC, JASO, XTEX, RINO, and XTXI all had moves of 7% or higher today) while only CMFO had a bad day. If you're bullish, it is good to see some of the momentum names moving again, but I still get the sense that it (momentum) is not as strong right now as it was a few weeks ago. Volume today in these stocks were in most cases not as strong as they were last week, and the moves seem less powerful. They also seem to be less consistent - anything China was moving last week but now it is hit and miss - CAAS and VISN did very little today. Maybe I am just expecting too much.

Overall, I remain in mostly cash and that is probably the best play until we get this range resolved. There is some action in individual plays but again, mostly only very short-term plays make sense. On the surface, it makes sense for the market to pullback here as volume has been lacking on the recent bounce and the market is short-term overbought - it looks to be time to once again "sell the rip". That doesn't mean, however, the market can't break to new highs. I am pretty neutral right now and have my finger ready on both sides - I just hope we don't get a false breakout that causes a lot of whipsaw action. That would be frustrating (which means that's probably exactly what we'll see.) Take care and good luck Tuesday.

No comments: