Thursday, January 7, 2010

State of the Market - 1/7/10

We had a pretty slow and choppy day today, but overall another bullish one as the bulls were able to contain a morning selloff and finish the market well off its lows for the day. Futures were flat this morning but the first half hour or so of trade did bring selling, particularly on the Nasdaq. A bottom was made soon after, however, and stocks gradually worked their way higher. There was a quick drop at the beginning of the final hour, but the bulls righted the ship again and stocks closed near their highs for the day. Volume appears to be lower.

Technically, not much changed today. The S&P continues to bump up against the top of an uptrend channel and although it looks like it closed slightly above it today, I can't say it was a breakout. Perhaps a good jobs number tomorrow would be a catalyst to get this really above this resistance, which would be very bullish. The Nasdaq continues to lag the S&P this week and is basically moving sideways. It is possible it is just resting and consolidating but I would want to see this get going soon, especially if the S&P can take off.


Charts courtesy of Worden Brothers, Inc.

Financials had a very strong day and although they are quite overbought, they look bullish overall. A pullback or rest in this area wouldn't be a bad thing however. Retailers have been moving sideways for a while and if they can get going, that would obviously be bullish for the overall market as well. Oil remains overbought but did not give anything back today and could just consolidate here for a few days instead of pulling back. That would also be bullish for the overall market.

I did enter ERY (the energy bear ETF) after-hours last night at $9.76, basically playing a hunch that we would pullback today given the extended nature of so many of the stocks I saw in my scans last night. It wasn't a big position and was meant for only a one or two day swing - I have my stop set at very close to breakeven, so if we don't pullback, it's not a big deal for me. I made no other moves today and remain mostly in cash.

I did see a little follow-through on some of the breakouts I did not get in yesterday like CEU and CTFO which is good, but overall I am really not seeing as many attractive setups right now on the long side as I did earlier. The hot China stocks like CAAS, CAGC, CMFO, and CSKI could be consolidating and if they rest for a few more days, you can be sure I will be very interested in playing them long. Right now, however, I don't see many hot momentum plays out there. I'll post my watchlist below for those interested (a few new ones on there), but most appear to be slower movers and with the jobs number coming out tomorrow, I may just do nothing because it might be the best play. We'll just have to see how it goes.


That's it for today - the market continues to be controlled by the bulls and there is no sign that things are changing. A pullback still wouldn't surprise me, but I will be looking to buy a pullback, especially into the 1120 area on the S&P. Such an event would likely setup many nice setups on the long side - who knows however if we'll get that lucky. On the other hand, if we get a good number tomorrow and put in a nice move up, I think you have to play the individual breakouts that occur. Take care and have a great Friday.


Lee said...

Still look forward to your posts each evening.....

FUQI - Is it possible they ramp it up based on the past weeks volume and price and SMA's it has regained?

Your thoughts greatly appriciated, and Have a Fantastic Year in Stocks and Family.

Mac said...

Thanks Lee - FUQI broke above a falling wedge on Monday and it is possible it moves higher from here. I think there are better looking stocks that will move better if this market takes off, however, and those are the ones I will be focusing on.