Monday, February 1, 2010

State of the Market - 2/1/10

We saw a bounce back session today on Wall Street, as stocks started the day higher and stayed that way, chopping their way higher to close at their highs for the day and with decent sized gains. Volume however was quite low - actually it was pathetic. On the S&P, volume looks like it will come in barely half of what we saw Friday, although I don't have the final totals. That takes a great deal of shine off the gains put in today. One of the things I talked about in my 2009 year in review is that I shouldn't put so much emphasis on volume, but when you look at how heavy volume has been the past two weeks on the selling and how pathetically light it was today across the board, it is hard not to focus on it.

Technically, the market was quite oversold so a bounce today was not surprising. I would say however that in the grand scheme of the last two weeks, the bounce was not all that impressive. It will take several days of gains and heavier upside volume for me to be convinced that all is well again and that it is safe to go back in the waters on the long side. I will be watching the 1095-1100 area on the S&P and the 2200-2205 area on the Nasdaq as potential resistance levels in the short-term as that is where the 9 day moving average is moving down to.

Sector-wise, commodities were the big winner today as oil and gold both put in nice bounces. I highlighted both gold and oil in the weekend video as being at key technical levels and at least for today, the bulls took control. That will all change, however, with a break of the recent lows. Outside of commodities, most sectors were indeed up but the action was not super impressive and came on much lower volume. The overall patterns in sectors like financials and commerical real estate continues to look bearish on the daily charts.

I entered one short from the weekend video this morning - COH at $34.99. I was also stopped out of one short from Friday - GOL at $12.70 for a 2.6% loss. I still have my TSL short but remain mostly in cash. Almost all of the shorts I highlighted in the video this weekend still look to have nice setups and some actually are in a less risky position to short now than they were at the start of the day.

I did find it interesting (and bearish) that as I took a quick look at my scans, very few momentum-type names moved higher today more than a percent or two outside of commodity stocks. With the market being up a decent amount, I would expect to see some big movers - perhaps after a more thorough look through my scans I will see more, but I doubt it.

I think the one hope bulls have right now is that oil and gold showed some strength today and were at key technical levels. If they bounce more, then perhaps this pullback will be just like the ones we saw in 2009 and today was the start of a steady path to new highs, albeit on lower volume. Somehow I doubt, but the chance exists. However, if oil and gold don't keep bouncing and break Friday's lows, then I think things get much worse for the overall market as well and we move toward those 200 day moving averages I showed in the weekend video. I will continue to look at shorts only for now but will likely still remain mostly in cash. Take care and good luck Tuesday.

1 comment:

CW, Portland OR said...

Entered QID and SDS and close of market....see how that works for me. Tells my direction I think this market is heading