Wednesday, April 28, 2010

State of the Market - 4/28/10

We saw a slightly positive session today on Wall Street, but from where I sit, it wasn't very impressive when compared to yesterday's action.   The market started the day slightly higher, but the highs for the day were made at the open, at least for the Nasdaq, as it drifted lower into the lunch hour.   It bounced back near its opening highs from there but couldn't get through and finished with small losses and in the middle of its intraday range.  The S&P did very little besides chop back and forth in a sideways range today.   Volume on both indices was lower than yesterday. 

Technically, the fact that the market took back very little (and in the case of the Nasdaq none) of the losses from yesterday is obviously not very bullish.  Perhaps the Fed news affected trading today a bit, but I said yesterday that I think yesterday could be a sign of change for the market and I still think that holds true overall.   For the first time in a long time, the 9 day moving average is now trending down.   A cross of the 9 and 20 day moving averages has been a pretty accurate signal for a correction (usually brief) or at least choppy sideways action since this rally began over a year ago.   I will be watching for that signal over the next three or four days and if it occurs, I would look more seriously at getting short. 

I made no moves again today and I still think treading lightly here makes sense.   To be honest, I don't see that  many individual setups out there anyway on either the long or short side - a few coils that may break soon but nothing that gets me too excited.   If we are entering a bearish period, I would rather wait for a few days of sideways action or light volume bounces before getting short.   How this week ends should tell us a lot - if the market can't take back most of Tuesday's losses, I think it will be telling.   The losses on 4/16 were almost totally recouped in the next two days.   After today's action, I don't know that we'll see the same thing, and that would signal a change in character.   Good luck Thursday.

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