Tuesday, February 9, 2010

State of the Market - 2/9/10

We saw another volatile and unpredictable day today on Wall Street, as stock rose on overseas bailout hopes following a very bearish session yesterday. Futures were up pre-market and stocks did open well to the upside. After a short pullback, they tried to break to new highs around 10:15 but couldn't and fell sharply from there. They righted themselves, however, and a very sharp move from 11:30 to 12:15 did take stocks to new highs and large overall gains. There was a sharp drop from there and stocks just moved sideways for the rest of the session, finishing with large gains but off their intraday highs. Volume appears to be coming in heavier than yesterday but not very heavy overall.


We are at an interesting technical juncture because once again, we reversed a bit when running into the 9 day moving average on both the Nasdaq and S&P - I mentioned the levels yesterday in the post (2165 and 1073). From a strictly visual perspective, the charts look bearish and much like they did last Wednesday, especially on the Nasdaq. As I stated yesterday, however, I am trying to pay more attention to the overall action rather than just the look of one or two charts. On that end, the action is mixed - if we didn't have a negative day yesterday, I might put more credence in a true bottom being put in here. Seeing that the market couldn't close at its highs and with volume not being overwhelming, I don't see today as a superior showing by the bulls - good, yes, but not awesome. As it is, I will wait until those short-term moving averages are overcome before seriously looking to go long. IF that happens, my outlook will change but as of now, I am definitely still leaning bearish.


S&P 500

Nasdaq


Sector-wise, most ETFs still look bearish to me. The dollar was down big today so oil and gold had nice sessions, but GLD is still fighting heavy resistance around $106. If it closes above that, I would get more bullish. Financials (XLF) simply look to be forming a bear flag here as they continue to get support at their 200 day MA but cannot climb back above heavy resistance at $14.00. I will be watching these levels carefully.


Gold

Financials

All Charts from Telechart, Courtesy of Worden Brothers, Inc.

I was stopped out of my BCS short today at $17.27, giving me the slightest of losses. I did not cover early in the session because I did not believe the pop it had was genuine, and that was proven to be right as it fell straight down from its opening highs. It popped straight back up however in a gigantic "V" move and that is what got me out. I also shorted a little AAPL mid-morning at $195.12 as the market looked like it was going lower at that point. It (the market) of course didn't but AAPL also couldn't overcome its 9 day moving average around $197, so I am still in this. This is the only position I have right now, although I am contemplating very seriously adding a few more shorts here.


I know you probably won't hear this many other places as most commentators always seem to know exactly what is going to happen next in the market, but I'll be honest and say I am finding this market over the past two weeks to be extremely difficult to trade. We have seen so many swings one way or the other (and most have come on back to back days) that finding a good setup and riding it for more than a few hours has been virtually impossible. Just the past four days, we've seen a very nasty sell off Thursday, followed by a bullish reversal that on the surface made Thursday's selloff look like a potential panic move. That supposed bullish reversal was followed yesterday by a quick pop followed by another big sell off that seemed to point to further selling. Of course, we saw the exact opposite today and popped big time to the upside, but still couldn't close at the highs for the day. If you could predict all of this movement and play it to your benefit, you are simply a much better trader than me.


When the market is as volatile and unpredictable as it is right now (as well as being very news driven), it is not really smart to be super agressive with your trading, and that's what I am trying to do here. With the exception of last Thursday, I have stayed mostly in cash and after today's moves, remain mostly in cash. I continue to watch some short setups as I think we still have more downside, but these short-covering spikes we keep seeing make that plan very difficult to execute, at least for more than a few hours. I plan on picking my spots carefully and hope that things get a little calmer soon, (regardless of which direction the market goes) so some trades can last for a few days rather than a few hours. Good luck tomorrow and be careful out there.


** A few new short candidates to add to the list - CNQR, ATI, MOT, CRR, HMIN, WATG

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