Wednesday, January 27, 2010

State of the Market - 1/27/10

We saw bullish action today on Wall Street, as stocks bounced off their lows mid-afternoon and finished at their highs for the day at the close, holding some support levels in the process. There wasn't a huge reaction to the Fed statement released today, but on the surface the market appeared to like it at least somewhat at it did rally after the release. Volume appears to be close to yesterday's totals, but I don't have the final numbers.

Technically, the Nasdaq and S&P were forming bearish-looking flags before today, but both managed to hold key support levels around 2200 and 1080 respectively and those bear flags don't look quite as ominous as they did at the start of the session. They could certainly still break with all the headline news out there, but overall today wasn't bad.

Sector-wise, many ETFs remain oversold and are in position to bounce, but that doesn't mean it has to happen. Financials (XLF) held key support today around $14.00 and continue to basically move sideways in a six month range. If that level is broken, however, watch out. Both retailers (RTH) and semiconductors (SMH) look bearish on the daily charts and need to bounce soon in my opinion. Oil remains weak and with the U.S. dollar looking like it may try to break out soon, it could remain weak for a while. It is oversold however so we could see a reflex bounce in the next few days.

I remain in cash as I don't see many interesting setups on the short side and I don't feel that comfortable trying to buy this dip with all the news coming out this week. I am leaning more long now simply because I don't hear many people at all that are bullish - the bearishness is heavy out there and it almost seems too obvious. I could be overthinking things however. I have my eyes on a few oversold plays but if I enter them it will be in small positions only. I still don't feel this is the time to make big bets on either side of things (as boring as that is.)

Good luck tomorrow - we've got the State of the Union, more earnings, and the delayed reaction to the Fed statement tomorrow to deal with, along with GDP coming out Friday. Fun stuff all around. If we break the recent lows this pullback will accelerate but I am leaning as of now to a slight bounce first. We shall see. Take care.


Eddie Betstock said...

Hi Mac,

Been reading your posts for a while now, keep up the good work, love your contrarian thinking, everyone is so bearish here in the UK, so I'm with you 'leaning towards a slight bounce' (stay nibble).

Much appreciated!


SupaFly said...

I also enjoy reading your blog.


Brian from MD

Doctor Stock said...

Good work... thanks. Interested to know what you think of the "show" from the gov't in light of the markets.