Tuesday, December 15, 2009

State of the Market - 12/15/09

A poor day today on Wall Street, as a stronger dollar sent stocks lower at the open and after an early bounce, they faded throughout the session. There was a gap down to start the day, but that gap was quickly bought, and by 11:00, the Nasdaq was actually positive for the session, breaking slightly to new highs. The top of the trading range, however, quickly reared its head again at that point, and stocks fell from there. The selling picked up some steam around 3:00, but a late bounce helped the market close slightly off its lows. Volume appears to be lower, at least right now.

Technically, it looks at first glance that today was a perfect chance to "sell the rip" as the upside resistance continues to be very strong for both the Nasdaq and S&P. With the dollar continuing to strengthen, it is asking a lot for the market to break out above such heavy resistance, so today's trading is not a surprise. Keep watching the 1120 and now the 2217 area to see if we can get through.

Speaking of the dollar, it is a little overbought and I am surprised (shocked actually) the market hasn't been hit much harder than it has as this dollar bounce has occured. Although we are at the top of the trading range, this revelation has me leaning a little more bullish here, believe it or not. I've said for a few days now that we clearly need a catalyst, and a pullback in the dollar could be it. As the dollar has come off a potential bottom from the beginning of December, the market has basically gone sideways, which is bullish overall. Gold and oil are still oversold, and a dollar pullback could blast these groups higher, which would likely push the overall market higher as well. Just an idea, but that's what I am looking for now. Of course, if the dollar continues to strengthen, then that idea probably goes out the window and we are just stuck in our trading range.

I made one trade today - CAAS @ $21.49 - that I was soon whipsawed out for a loss (stopped out at $20.50). It looked like it was moving out its range this morning and volume was heavy (that was the key at the time for me) but it obviously didn't last. A lot of the China momentum plays reversed today after being up earlier (TSTC, RINO, CAGC, FIRE) and it may be the end of the road for these stocks, at least in the short-term. I mentioned last night that the momentum seemed to be waning a bit and although the setups were there this morning, the lack of follow-through means this is probably true. Ironically, I am still holding VISN and it was one of the few that did have a good move today. I thought about adding to it as it broke out but I will just hold what I have and may take profits quicker than I originally hoped.

Overall, I am happy being mostly in cash but continue to look for longs to play for a few days as they present themselves. I am not trading heavily, but am not opposed to taking opportunities if they are there. I will share them as I see them - right now cash still remains a good main option. Take care and good luck Wednesday.


Anonymous said...

Hi Mac,
Thanks for the update. And the big picture does seem like its probably gonna break out -- but when and for how long is uncertain.

I did get into VISN (a very small buy) based on your mention here and I do see some gains that I will likely take very soon. Really appreciate you sharing your scans with us.

Have you considered tweeting your transactions? Just curious. Thanks for the blog!


Mac said...

Thanks PA - I do have a full-time job and since I don't want to be fired, I can't tweet real time buy and sells. I will when I am not working - for instance, I have some days off after Christmas, but usually I have to wait until I get home to tweet anything I have done.