Thursday, December 3, 2009

State of the Market - 12/3/09

Not a very bullish day on Wall Street today, as stocks rose early once again and tried to push to new highs for the year, but failed to do so. They started reversing shortly after the opening but just moved sideways for most of the session. Around 3:30 however, things got nasty as the S&P fell 10 points and the Nasdaq almost 20 points in the last thirty minutes of trading. Volume appeared lighter for most of the session but I don't know what that last half-hour did to the trading volumes overall.

Technically, if we had heavy volume over the past few sessions, I would say we are no doubt churning here, meaning lots of trade with very little price movement. The little price movement is certainly true, as today was the third straight day the S&P attempted to move to new closing highs for the year and the third straight day it was unable to do so. Perhaps a catalyst is just needed here, but the action does look toppy on the surface. The fact that the Nasdaq attempted to get to new highs as well but reversed does not paint a very bullish picture right now. My guess is that last half-hour was related to traders just not wanting to stand in front of the jobs number tomorrow, but it was bearish nonetheless.

I know I have been harping on these two groups for a while now, but both the financials and small caps put in bearish technical days as well today. XLF started out very well today, breaking a downtrend line and its 50 day moving average before selling off hard and putting itself back down below those important levels. The Russell 2000 did pretty much the exact same thing today, starting the day above resistance but falling back below it by the end. So as I've been saying for a while now, these two areas in particular give much reason to be cautious with this market as a whole.

I did make a few small trades today but in hindsight, with the jobs number coming out tomorrow, I probably should have just waited. I entered BAC at $16.66 as it got above some resistance around $16.60 this morning. That breakout attempt as you may guess failed and reversed, and I was stopped out at $16.17 for a small loss. I also entered HGSI this morning at $28.25 as it attempted to move above some resistance as well. It did move nicely for half the day, getting as high as $29.29, but reversed hard as well and I was stopped out at $27.96 with another small loss. Perhaps it is for the best anyways, as I am back in cash before the jobs report tomorrow.

So overall, there are technical reasons to be bearish here, but at the same time, I do realize that a good number tomorrow could push this market higher so I don't want to short just yet. I keep thinking we are reaching an inflection point soon where this market is going to just tank or really ramp up to the upside hard. The technicals for the most part say that the move lower has a higher likelihood, but they've said that before as well and the market hasn't listened. I guess the best thing to do is just watch and see how the market reacts tomorrow - one way or another, we will hopefully get a trend going again instead of the chop we've seen for about two weeks now. Take care and good luck Friday.

1 comment:

Anonymous said...

Mac,
Thanks for the generous reply last time. While the fundamentals seem very very wrong for BONT, could you please take a look at it from the TA side? Its a stock that has grown 900~% I think over the past few months alone and they are bleeding money. I established a short this morning, considering if I should just let go at a small loss rather than fight the apparent (to me) manipulation. Thanks!