Thursday, March 11, 2010

State of the Market - 3/11/10

New day, same story - we are in the market that never rests. Stock tried to sell off a bit at the open today, but the lows for the day were put in around 10:00 and from there, the bulls worked their way back up to gains. Most of the session, from around 11:00 to 3:00, was spent just chopping sideways, but buyers once again came in during the final hour and pushed stocks to new highs and further gains for the session. Volume looks to be very light.

Technically, what can you say? I've been preaching that it would be very healthy and normal for the market to rest at some point this week, but it just hasn't happened. I am wondering if we are in the middle (or second half) of a run like we saw in July and August of 2009, when stocks were extremely overbought but just kept running higher. That move was kind of surprising back then in terms of how long it lasted, and this is one is just as surprising in that regard.

The close on the S&P was quite interesting today. The most recent high was at 1150.43, and the closing high today was 1150.21. Can't get much closer than that, can you? I am going to stick to my guns and not chase things here - at some point the market will rest and pullback and the more we go here without a rest or pullback, the harsher that pullback will be. I am not bearish here - please don't think that. I am just saying that markets can't move up forever, and we are pushing the extremes as of now. I still think it pays to be cautious here on the long side.

Interestingly enough, as I look through my scans, I don't think I've missed that much the past few days from being in cash and waiting for some rest. All of the stocks I sold Monday are either at or below the prices I sold them at, which is good. I continue to see a lot of stocks setting up nicely, however, and I will be looking to buy them as they consolidate further. Perhaps I need to ignore the overall market and just focus on the setups I see. Again, not many of these are ones I would buy at this very moment, but many are worth watching for possible entries next week. They are listed below.

MIDD, CISG, TSRA, SEED, HVT, BID, XTEX, CMFO, STC, SNIC, SXCI, RINO, JAZZ, CVVT, EJ, APL, KNDI, CNAM, NLST, ZOOM, CYD, ANF, GFRE

We kind of have a weird market in that it continues higher in the face of very overbought conditions but individual stocks in many cases are pulling back and consolidating. I am not quite sure how to take that - does it mean the market is rising with fewer and fewer stocks moving with it, or does it mean individual stocks are getting ready to move again to push the overall market even further, regardless of overbought conditions? Should we pay more attention to individual stocks or the overall market? Any ideas out there? Feel free to share. I know what I think.

Overall, I will probably be taking tomorrow off and staying in cash until the start of next week. I am not discounting the possibility that this market will work off its overbought condition as it moves higher - that doesn't make any rational sense, but it happened back in 2009 several times so it is possible, depending on how intraday trading goes. I continue to think however it is better to wait as a swing trader for a little consolidation before getting long again. If you're day trading, then just keep watching the plays and go with them. Good luck Friday.

1 comment:

Anonymous said...

Good post and totally agree. Swing trader here and I too am all cash. Watching the overall market to lead me.