Wednesday, February 24, 2010

State of the Market - 2/24/10

A day after selling off on heavier volume, the market did their best to confuse most traders, climbing higher in a choppy session. Stocks started higher and rose for the first half hour of trading, but quickly gave all of those gains back. The gap open did hold in the morning, however, and stocks went right back up to slightly new highs before lunch. Although the morning was very volatile, stocks didn't do a whole lot in the afternoon, just basically moving sideways and closing near the morning highs. I don't have volume totals but it looks close to yesterday.

Technically, we are still in no-man's land, as neither the bears or bulls want to take control right now. Yesterday, things looked bad and it seemed further selling was a good possibility. After today, who knows? Neither the S&P or Nasdaq reclaimed their 50 day moving averages today, so perhaps that is a small clue that bears watching. The financials, however, reclaimed their 50 day, so I say again, "who knows?" Volume of course was lower there just to confuse things even more.

As you may guess, I did nothing today and remain in cash. I just don't see any real advantage for either the bears or bulls here and when that's the case, I don't like to force things. There are a lot of conflicting signs right now - for instance, why was the recent China strength (TSTC, CAAS, CAGC) sold off so hard today with the market? This seems to be a confused market to me (or perhaps I am just the one confused). Either way, I'll wait to get some confirmation of where we head from here before getting aggressive. Perhaps we will form a little bull flag - if that happens, I'll get long. Maybe today was just a quick head fake for the bears before we head lower. If that happens, I'll get short. Right now, waiting to see what outcome occurs makes sense to me. Take care and good luck Wendesday - time to finish watching this hockey team. Go USA!

** I also wanted to share a special webinar being held for new traders this Friday - it is totally free to sign up and might be worth checking out. Click here for more information.


Jeremy said...

Hi Mac. I really need to learn from you with regard to being patient. You seem to be able to refrain from any trade when you believe the market is not in your favor while I just can't. I learned the lesson the hard way this week when breakout trades like YUII, IPXL didn't work well for me - I kinda force the trade.....

Mac said...

Jeremy, believe me, it is a hard thing to learn and I am not a master at it - I still make trades from time to time that I should refrain from. Experience I guess gives you a better feel as to when to trade heavily and when to not trade much at all. My biggest problem is when I don't see much, I tend to lose focus and miss out on the one or two trades out there - for instance GPRE long this week (an earnings move) and AMSC short (a chart I have shown several times on the blog). I guess I get lazy a bit when the market isn't setting up.