Tuesday, April 13, 2010

State of the Market - 4/13/10

It's starting to feel like Groundhog Day around here - the same stuff happens every day.   Today on Wall Street we saw a drop shortly after the open, followed by a steady climb higher that pushed stocks positive by the end of the session, but only slightly.  Both the Nasdaq and S&P dropped near their 9 day moving averages but closed well above them.  Volume was heavier on the Nasdaq and just slightly heavier on the S&P.

I'm not going to talk to heavily about technical aspects right now because earnings season is now upon us and those will take precedence over any technical levels or moving averages or whatever you want to look at.  It's quite obvious we've traveled very far without a significant pullback and entering earnings season with that setup can sometimes be trouble.   I don't know if it will be - we just have to wait and see.   My guess is that these reports don't have huge margins of error due to our technical position.

Why would I say that? Probably just a gut feeling (which have all pretty much been wrong recently) but when you look at this move, there have been some amazing things that have taken place.   I believe today will be the 34th day in a row where the S&P and Nasdaq closed above their 9 day moving averages.   That is an historical event based on all recent data I can find.   It has also been 34 days since either indices has had a one-day loss of over 1%.   That has to be some kind of record, doesn't it?   On February 23, both indices were down 1.2%.   Since then, the biggest loss I could see was 0.68% for the Nasdaq (3/24) and 0.59% for the S&P (4/7).    The rational side of my brain sees these numbers and thinks earnings better be pretty darn good.

What's weird to me is that this month-plus move hasn't had any really big days as well.   For the S&P, I can only see 2 days where gains were more than 1% (3/1 and 3/5).   For the Nasdaq, I see three - 3/1, 3/5, and 4/5.   We've just had a super long string of days where the market has been up just slightly.   It really has "ground" its way higher.

I was stopped out of most of my positions today as I had tightened stops up to breakeven on those ones I had small gains on.   SEED was stopped out at $10.15 for the smallest of gains.   No follow-through there at all off of Friday's move.   BZH was also stopped out at $5.00, giving me the smallest of losses on that position.   Both of those were basically breakeven trades.   XJT reversed today and my stop was hit at $3.97, giving me a 2% loss, and my stop on EGI was also hit at $3.00 for a 3.3% loss.   My frustrations continue.   NEP is my only position of note (along with CISG in my IRA) and with earnings coming out Thursday, I may exit tomorrow.  I'm thinking it will be one of those things that if I hold it into earnings, it will gap down huge, but if I sell, the report will be great and the real move will start.  

We'll see how the INTC report comes out tomorrow but for now I think I will be trading less over the next few weeks.   I want to see not only how the reports look but how they are received.   Are dips continued to be bought, even in the face of disappointing news?   Are good reports bought with vigor, or do we see a lot of gap ups with fades?   These are all things that I think are important to watch over the next few weeks.  

We've come far enough where a pullback certainly makes sense, but we've been saying that for a while.  Nothing has knocked the bulls off their perch for almost 40 trading days now - maybe earnings are the thing that will do it.  Maybe.   I am not putting my money on it - that's for sure, not yet at least.  Be careful out there - things will be interesting over the next few weeks.   Good luck. 

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