Monday, January 4, 2010

State of the Market - 1/4/2010

The market got off to a good start for 2010 today, as futures were up pre-market and opened very strong. Stocks ran nicely for the first fifteen minutes of trading, consolidated, and then ran again around 10:25, reaching a high a little before lunchtime. From there, things calmed considerably and the market moved sideways in a tight range (six points on Nasdaq, 2 points on S&P) into the close. Volume was heavier than last week's light holiday totals. Most of the move today is likely in response to a falling dollar, which pushed crude oil and commodities in general up nicely.

It is certainly nice to see the markets open the year strong, but that doesn't necessarily mean things will continue that way. The first three days of 2009 were very positive, but the market soon fell precipitously. In 2008, the market started weak and continued to be very weak right off the bat. Hopefully, the market can see some follow-through tomorrow - the down day Thursday took care of some of the overbought conditions and there is room to run to the upside if the bulls have the energy.

There were also some good sector developments today - financials poked their head above a trendline and their 50 day moving averages after flatlining for so long. If they get going, it would be good news for the bulls. Oil also looks quite strong after today but is quite overbought so I would be careful there - a quick pullback in commodities would not be surprising.

I did make a few trades today - got out of my DUG position pre-market at $12.44, which gave me a very small loss of 0.6% (entered at $12.48). From the video watchlist this weekend, ENOC, NEP, VIT, KIRK, RDN, CYD, MTG, and CGA all had nice moves, but nothing spectacular - all in the 4-7% range. I did enter MTG this morning at $6.00 - we'll see if it breaks out soon. I also entered ATHX this morning at $4.34, thinking it was going to bounce. No such luck, however, as it quickly fell below short-term support and I was out at $4.06 for a 6.9% loss. It wasn't a huge position, but I probably should have kept my stop tighter. The only other position I hold now is long IMAX (from $13.23 on New Year's week), but it isn't doing much either.

I do wish I would have seen a bit more explosiveness in individual stocks today - many closed a little weak for my tastes, but perhaps these stocks just needed to rest a bit. I will keep my eyes out tomorrow and will be willing to play some of the setups I see - I would just like to see some immediate follow-through once in a while.

That's it for today - strong move to open the year and hopefully the bulls can keep it going. I am a little worried because it seems like it has been "too" easy for the bulls the past few weeks but who knows? I will remain focused on the individual setups I see and go from there. Have a great evening and best of luck tomorrow.

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