Wednesday, December 9, 2009

State of the Market - 12/9/09

We had a bounceback session today on Wall Street, which is not surprising given the range-bound market we are in and the fact that the market was close to the bottom of that range. The market started the day slightly lower and slid slightly further from there, coming close to some key support levels. Buyers started to come in around 9:45 and pushed stocks higher for about an hour before pulling back again into lunch. They held their morning lows and then rose back into the close, finishing close to their highs for the day and with decent but not overwhelming gains. Volume appears to be lower yet again.

Technically, I said yesterday that I expected a bit of a pullback in the dollar due to its overbought condition and we did see that today, which likely led to some of the bounce we saw today. The pullback wasn't harsh however and in order for the market to rise further from here back up to the top of the range, I think the dollar would have to fall further. If it just consolidates in a bullish fashion, that would be obviously bearish for stocks. I think we need some sort of trigger to get stocks moving out of this range and perhaps the dollar could do it. The S&P and Nasdaq are still trapped in a sideways pattern and are doing very little.

Sector-wise, oil was hit yet again today and I would expect a bounce soon in the commodity area as it is quite oversold. However, if the dollar doesn't move lower, that may not happen. Financials did little today and continue to move basically sideways as well with a slight downward bias. Retailers pulled back yet again today but RTH is right on its 50 day moving average and is oversold so a bounce wouldn't surprise there either. If they break that 50 day, it would of course be bearish for this group.

Although it is smart to remain in cash during a sideways market, I made two small trades near the open today - bought SEED at $11.36 right after the open and later bought TSTC at $15.34 and $15.39 a bit after the open. Both looked like low-risk pullback plays if the market bounced. We'll see if they get moving - I will not hold through any further pullback and my stops are in place as always. I want to see some immediate movement (saw a little today in TSTC). Overall, I am still mostly in cash but will continue to keep an eye several charts, particularly the airlines I mentioned yesterday. They are consolidating nicely (look at PNCL and UAUA for two examples) and if the dollar remains strong and oil doesn't bounce, these look like strong potential plays.

That's about it for Wednesday - range-bound markets are pretty boring, but there are a few plays here and there to keep an eye on, so always be on alert. Continue to watch that dollar - a consolidating without much giveback of the recent gains would be bullish for the dollar but bearish for the overall market. That will likely determine much of what happens the rest of this week. Take care and good luck Thursday.


Anonymous said...

Mac, are you still holding SEED? Its December MaxPain is $10. Do you think it still have any upside before next Friday? Thanks! Elena

Mac said...

I think I am out soon if it doesn't get going - I wanted to see some momentum and have yet to see any. I have a stop in mind and if you follow me you may know where it is.