Tuesday, February 16, 2010

State of the Market - 2/16/10

We had a very good day today on Wall Street, as stocks started higher and continued to move higher throughout the session. They chopped around a bit for the first half hour of trading and it looked like the gap might be sold off, but they did right themselves quickly and broke to new highs for the day a little after 10:00. From there, it was a quick move up, followed by a short pullback and then further gains into the lunch hour. The market moved sideways for most of the afternoon until the final hour, when they moved higher into the close with a new wave of buying. Volume looks to be much, much lower - that is the only worrisome thing I can see about today. Perhaps the volume totals will surge in the final half hour and this will change, but it bears watching.


Technically, the things I had been waiting for before turning bullish have happened, so I do have to reassess my outlook. Financials finally broke above key resistance around $14. Gold and commodities have broken to the upside as well and look like they want to move higher. The market is now above resistance levels from November-December of 2009 and looks poised to move higher. Next levels to watch are the 1105-1108 on the S&P and the 2227 level on the Nasdaq - this is where the 50 day moving averages will come into play and could act as resistance.


The dollar had a big move lower today and that is really what drove the move higher. UUP should have some strong support around $23.25 so keep your eye on that level as a possible place where the market as a whole could pullback (on a dollar bounce). All in all, however, things look quite good for the bulls right now. We aren't really even overbought based on the measurements I use. Hopefully all of this good news is not a bad thing.


I made one trade today, entering FAZ at $20.16 early in the session. On the surface, it wasn't a big deal - I intended to make this trade with a very tight stop below the low of the day at that time and felt it was worth a shot. Unfortunately, I messed up the order and with it my plan for this trade. I don't know how I did that - I intended to set a hard stop at $19.86, but I guess I put that in as a trailing stop instead, which was never filled. Stupid on my part. So my loss was much more than I intended it to be, as I sold out later at $19.33 (4% loss). I had planned for my maximum original loss to be 1.5%. Again, just careless and stupid.


To make it worse, I hesitated and eventually passed on some long trades that would have worked very well in hindsight. Early on, I did post on Twitter the names CSIQ and CAGC (check my feed out if you want), but I didn't want to chase them with the morning gap. Again, not real smart on my part because both had very nice sessions today. I had a plan going into this week that I wrote about this weekend, but did not really follow it when push came to shove. I think the expectation of a gap and fade open affected me and ended up hurting me. From my watchlist, NOA and FINL also had decent days, but there were some stocks that didn't do anything either. I do wish I had more really nice long setups but I don't right now.


We'll see what happens from here, but I am definitely not going to fight this market on the short side right now as the technical obstacles overcome today are significant. Going long seems to be the right play but I am going to be careful about that as well, because we know how this market likes to trick people. Everything seem great now, but a turn is always possible. As long setups show up (hopefully), I will play them as I see fit, as I am 100% cash right now. I gotta get some confidence back as well before I get agressive, as I don't have a ton at this moment. Good luck Wednesday.

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