A rough day today on Wall Street, as a higher dollar caused stocks to fall. However, most of the selling was done on the opening gap, as stocks moved basically sideways in a range for the rest of the day rather than selling off. The Nasdaq actually rose above its morning gap before falling back a bit into the close. Volume looks like it will be light compared to yesterday.
Technically, it is not surprising to see the market drift lower here after banging its head against the top of the current range last week and with the dollar continuing to rally. No real damage has been done however and basically the story remains the same - we are in a range-bound market. Watch 1080 as support on the S&P as the 50 day moving average is right there, and watch 2135 as support on the Nasdaq. I don't know however if the Nasdaq will get that low.
In terms of sectors, the financials continue to drip lower and oil broke a little support today via USO but the small caps are suprisingly hanging in there a bit which is good to see. We'll have to see what the dollar does - it has put in a nice move here including today's pop, but with President Obama coming out and saying things like "we are going to spend our way out of this downturn", I have a hard time believing the dollar is truly bottoming here. Oil and gold have been hit hard this week because of the dollar bounce, but I expected more of a rush out of these areas than we have seen. As it is, the dollar is overbought and a pullback would not be surprising at all. That's why I am expecting a market bounce over the next few days as well.
In terms of individual plays, I do see some longs that have pulled back nicely (TSTC, QLTI, SALM, SEED, TTM) and I will watch these over the next few days in case we do see a bit of a bounce here on the overall market. If the dollar does stay overbought and we see futher selling, I am looking hard at the airlines (XJT, PNCL, UAUA, LUV) as they have rested for a day or so now and look quite strong. A higher dollar means lower oil which benefits these airlines so that's why I will be watching. I do expect the dollar to pullback soon but in case it doesn't, this area looks good to me. I still don't feel comfortable shorting anything so I won't.
That's about it for today - still stuck in a range so I won't be doing a whole lot but I am getting interested in a few pullback plays so my eyes will be on them the next few days. Watch that dollar and trade accordingly. Take care and good luck Wednesday.