Tuesday, January 12, 2010

State of the Market - 1/12/10

I just got back from the doctor (looking at my knee - probably just old age setting in) so I am a little out of it right now in terms of what happened today. This post might be short until I catch my thoughts a bit more. From what I see, the numbers for the overall market might not look as bad as what really happened today under the surface to individual stocks, at least from the stocks I follow. I see a lot of damage in those stocks and perhaps the caution I started to feel yesterday was warranted, as it now looks like we could pullback here a little.

The technical damage wasn't huge on the major indices today but we did get a lot of volume to accompany the selling we saw and that is never a good thing. In addition, oil took a big hit (via USO) and the bullish consolidation I talked about last night is no longer. This would be bad for the overall market. Gold had a major reversal as well and commodities overall look like they could sell off a bit here. Financials had a pullback as well and fell out of the nice tight consolidation they were forming as well but aren't damaged severely yet.

I was stopped out of all my positions today and am back to cash. I guess I got a bit away from my "take profits quickly" mantra with CHINA, as I passed on the 9% gain yesterday and just moved my stop up to breakeven. I was stopped out today at $2.73 for just the slightest of gains. KONG looked good early but reversed hard as well and I was stopped out at $12.77 for a 4% loss, although I got a bad fill on that one - my stop was higher. I was also stopped out of FEED at $5.13 for a 4.75% loss - that in hindsight was not a smart position to start yesterday given the reservations I started to feel about the overall market. I gave back some of my gains for the year today and am up just slightly now.

These are stocks that I follow that had slight to severe breakdowns today - SEED, KNDI, NANO, FSII, ASYS, HITK, JASO, CAAS, CAGC, SOLF, (the last three may have island tops put in), IMAX, KONG, AMKR, CSKI, SWI, GMXR, ARST, APWR, and CYOU. Obviously a lot of China names and recent momentum plays on there and you have to be careful playing these. Don't overstay your welcome or get in too late, or you'll be looking at some quick and sharp losses.

To be fair, not all my charts were destroyed today, and I actually saw some in my quick look through my scans that still look attractive. I don't that today means the end of this rally or anything - I don't think it would be smart to draw that conclusion yet. I think it does, however, give me enough concern to pause here a bit before jumping into anymore of these names on the long side. Let's see if the bears follow-through tomorrow or any other time this week. The gains last week and on Monday were never very convincing, so the setup is there if they can run with it. They have to prove themselves first, however, at least from where I sit.

Earning season has now officially started so that will likely control the short-term direction of the market for a while. It makes it tougher to trade things from day to day so if I trade I will likely remain very short-term oriented. Good luck Wednesday.

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