Thursday, January 14, 2010

State of the Market - 1/14/10

We had another up day today on Wall Street, although it didn't start that way. The market opened just slightly lower but was able to right itself very quickly, bouncing straight up for the first forty minutes of trading. There was a sharp pullback at that point, but the bulls once again righted themselves soon after and moved steadily higher for the rest of the afternoon until the final hour started. There was a pullback at that point which took stocks their best levels for the day. Volume appears to be lower once again. Perhaps traders are just waiting for the big earnings reports from INTC and JPM tonight and tomorrow.

Technically, neither the S&P or the Nasdaq were able to close at new highs today and we are at an interesting point here, especially with options expiration tomorrow and the earnings news coming out. We saw a big, heavy volume down day Wednesday and two weaker volume bounces the past two days - typically that's more bearish than bullish. I am still giving the bulls the benefit of the doubt until proven otherwise, but I just would like to have seen them show some real strength by now - they just keep grinding higher and it appears to be weaker to me. The more we kind of just hang out here with very little upward momentum shown, the more I would worry about a meaningful pullback starting soon.

Sector-wise, the financials (XLF) continue to consolidate and have set up a very nice cup with handle pattern that would seem to indicate higher prices. If they do get going, that may be the boost the overall market needs to get going as well. We'll have to see what the JPM report does to that pattern tomorrow.

I made one trade this morning, entering CPBY at $6.34. It was not on my specific watchlist going into the day, but I knew the chart and it showed up on the pre-market website I follow, so I added it to the list. Volume was so strong in the first ten or fifteen minutes of trading that I felt it was worth entering, as it moved on news of updated contracts. By midday, this stock looked great, but I didn't really like the way it closed. We'll see if it can get going tomorrow.

To wrap this up, I don't have a good feel one way or the other of where we go from here, and that makes sense I guess - maybe the market doesn't know either until these earning reports start kicking in. As such, I will remain cautiously bullish and play individual longs as I see them setup, but as my mostly cash position attests to, I think being cautious is smart. I am watching MDC, BZH, DRL, CHINA, and AEIS tomorrow but will have to go through my scans tomorrow before seeing if there are any others. Good luck Friday.


Anonymous said...

What is the pre-market website you follow Mac? Sounds like it could be handy .. coz it showed up on my radar AFTER it had a good move already and subsequently I could never convince myself to enter!

Appreciate sharing the knowledge!


Mac said...

That's the simplest one and the one I normally use. If you can catch an "In Play" post on YahooFinance, those show all the earnings and news pre-market and you can go through the interesting cases to see if they're moving as well.