Tuesday, March 16, 2010

State of the Market - 3/16/10

We saw another up session today on Wall Street, as the Fed's decision to hold rates at record lows for at least another few months was met with some enthusiasm from traders. It was a choppy session that came on average volume, however, so we may need to wait a few days to see what it really means.

Technically, the important 1150 level was overcome on the S&P today but the move came on volume that was not really above average. The negative divergences I showed in the video this weekend with the Moneystream are still very much there. These divergences show up in the S&P, Nasdaq, Dow, Transports, IYR, XLF, RTH, and QQQQ. Maybe all of this doesn't matter - to be honest, I don't know. The only index I see that isn't showing this divergence is the Russell 2000, which looks quite bullish and has formed a very nice bull flag the past few days. It would be nice, however, to see more individual small caps moving higher here as well, which I haven't seen as much the past few days.

In terms of individual stocks, not much really happened again today. I watched the first fifteen minutes of trading, didn't see anything moving on heavy volume, and shut it down until the end of the session. BID (shown in this weekend's video) had a nice session but really that was it. CFSG had poor earnings and was quickly off the watchlist - it is a good reminder why you should never take positions in front of earnings reports. LIWA and CEU were two stocks that had slight breakdowns today. Others like SQNM and CAGC give me a little pause as well. Besides those, again, not much of anything did much of anything.

This is getting to be a weird market in my opinion, as I watch individual stocks pullback and look for the most part bullish, but I also watch the overall market continue to move higher with very little rest or volume, allowing negative divergences occur. It seems like the two are not moving in tandem right now (for instance, my quote board was mostly red today), and I don't know what message to take from that. If the real market was as strong as the rising prices have made it seem the past few weeks, then I would expect to see more stocks resting for only one or two days before moving higher and higher as well. I am not seeing that however for the most part - I'm seeing stocks have pullbacks of a week or two even though the market is not. Again, I am not completely sure what to make of this, but for two to three days now I have been ready to start a few positions but have found nothing worthwhile to buy. That is a bit worrisome to me. Perhaps my scans will show me something new tonight.

Overall, I will still be focusing on potential longs and am willing to take some if they present themselves but remain in 100% cash as of now. It's not that I am bearish - I just haven't found anything that has excited me for at least a week now. Hopefully that is not a sign that we are about to have a long-overdue correction, but in the back of my mind, that's what I am starting to think, a correction that might last for more than a few days. The SPY has been up now for 13 straight days - strong market or overextended market?? I guess you have to decide that. Remember that this is an options expiration week so the next few days may have some games played - trade accordingly. Take care and good luck Wednesday.

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