Wednesday, February 10, 2010

State of the Market - 2/10/09

What looked like it was going to be an interesting day turned into a snoozer on Wall Street, as stocks moved lower early, bounced back, but could not get through key resistance and did virtually nothing in the afternoon. Stocks started the day flat, but soon began selling off. They formed a mini-bear flag in the first half hour and then broke down from there, falling about twenty points on the Nasdaq in about a half hour. Things looked bad, but they got some support near yesterday's lows and moved higher from there through lunch into the early afternoon,. After some fighting, stocks could not hold above some key resistance from yesterday and fell back into the close, ending the day with small losses and in the middle of their intraday range. Trade seemed very slow from lunchtime on and volume attests to that, coming in quite a bit lower than yesterday.

Technically, the 1070-1073 levels on the S&P and 2150-2155 levels on the Nasdaq seem to be quite important right now, as stocks meandered right around or below these numbers all afternoon. Coincidentally, the 9 day moving averages that I mention so much are right around 2160 and 1075 for both indices, and as I stated yesterday, a move above those would get me more bullish than I am now (not very much by the way). As of now, the two main indices both still have the appearance of bear flags, and that is not good.

Financials also had an interesting session as XLF climbed just above key resistance at $14.00, reaching a high of $14.06 before falling back down below these levels. Coincidentally, the 9 day moving average here is around $14.03. If these levels are overtaken, I think we could see a big short covering bounce, but today was disappointing in that respect for the bulls as they closed below once again. There is a bear flag forming here as well. Gold (GLD) also remains below the key resistance I've been talking about around $106. I've stated this several times but it bears repeating - until these two ETFs climb above these levels, I have to remain bearish, as I don't see any significant rally occuring as long as they are under resistance. If they climb above, I'll change my opinion and outlook.

Four Key Charts
Charts from Telechart, Courtesy of Worden Brothers, Inc.

I did make some trades today, and if you follow me on Twitter, you can see all of them and other thoughts I had (as I was off work today due to more snow here on the East Coast). I don't want to be super agressive right now, but based on the morning action, I did take on some small short positions. I shorted PWRD at $38.39, DAN at $10.11, and EJ at $16.61. These all acted well until of course the market reversed and now I may be out of these soon. I actually was surprised I wasn't stopped out of some today. We'll see what happens with these tomorrow, but I won't hesistate to run if the market gets past those levels mentioned earlier. Until that happens, however, most evidence points to playing the short side. I thought long and hard about taking down some FAZ as well with financials so close to resistance, but I didn't feel like holding it overnight without a big cushion was smart.

I hate to say this (because I'll probably jinx myself and we'll just keep going nowhere) but I think we are getting very close to a point where the market has to do something one way or the other. The technicals are at interesting junctures and I don't know how much longer we can just go nowhere without a big move up or down. The charts still seem to point to more of a chance of a move lower, but we all know how much the market likes to confuse people, so I am trying to be ready for anything. I would advise the same - look for shorts selectively but be ready to run at a moment's notice. Take care and good luck Thursday.


polarpanda said...

Thank you for your charts and insight as always. Best regards.


Mac said...

Thanks Johnny.