Friday, January 29, 2010

State of the Market - 1/29/10

Another really bad day today on Wall Street, as stocks started strong and once again faded mightily, giving up all of their gains by 2:30 and closing once again with large losses, finishing near their lows for the day. The lows of yesterday were easily broken today on both the Nasdaq and S&P, and these indices are now down over 7% and 6% respectively in the last eight trading sessions. The next layers of strong support don't come in until around 2025 and 1030 for the two indices and it is entirely possible we soon visit the 200 day moving averages on both, which would represent pullbacks of 10-12% from their recent highs.

Lots of technical "bad news" out there to worry about - UUP looks like it broke out today of a long-term bottoming pattern and that is bad news for anything commodity related, as oil was indeed lower once again. The VIX is forming a very bullish looking flag pattern and looks like it wants to go higher - again, not good news for the overall market. Semiconductors got smacked today and financials look to be forming a bear flag that does not bode well for their future.

Although charts are important in analyzing the market, sometimes you just have to pay attention to how the market is "acting" instead of the charts and today really showed me that this market is much worse than even I thought. A big, surprising GDP number along with more decent to good earnings reports (AMZN) could once again do absolutely nothing to get this deeply oversold market moving to the upside, and that bodes quite badly for the next few weeks. If it can't rally off of this type of news, exactly what is it going to take for the market to rally? I don't know. I do know that I am now strictly looking at shorts until the market shows it has at least some ability to hold a rally, and right now that time looks far away. I've been burned slightly trying to dip buy this week - not much, but slightly - and I think I am done trying. 2009 programmed traders that it was OK to do this, but the fact that is now not working is proof positive we are in a changed market.

I was stopped out today of my PEIX position in the afternoon at $2.05. I went into NEP this morning at $8.15 as volume was very strong early on and I did expect a short covering bounce to happen, but I was later stopped out at $8.05 as it could not hold onto any momentum. Later on, I did finally get short via TSL at $22.43 and GOL at $12.41 - both of these setups were shown in last night's video. I didn't take any more positions on as of now as we are quite oversold, but I am fine with riding just these two and can always add later.

We'll see where we go next week, but I continued to be surprised at how heavy the selling has been and how weak the bulls are right now. I expected a pullback but I guess I thought it would be a little calmer than we are seeing. So be it - I will continue to look for shorts and today proves very nicely that any bounce we get should be shorted, at least until the bulls show that they are still in the game. We are indeed deeply oversold (McClellan below -300 - lowest level since October of 2009) so we could see a relief bounce early next week but I don't know if matters - it will likely just be sold. Take care and enjoy the weekend.

No comments: