Wednesday, May 12, 2010

State of the Market - 5/12/10

Another up day on Wall Street today - I'm not sure why but I really wasn't following the action either.  It was one of those slow, steady climbs where the market rarely spiked up but also rarely pulled back significantly.   The indices are right near their 50 day moving averages, which could provide some resistance, but I still feel we're in a confusing situation due to the Thursday crash and that things are still tricky to read.

If you're looking for important levels, on the surface two numbers I would watch are 1180 on the S&P and 2450 on the Nasdaq.   Those are the necklines of the head and shoulder patterns that were cut through to the downside last week.   A retest following a breakdown is historically normal so I would keep my eyes on how the market acts around those numbers.   A move to those levels or slightly above would probably frustrate a few early shorts that got short at the 50 day moving averages and would also likely put the market in a short-term overbought condition.   I still think the chances of the market heading lower from here over the next few months is much higher than the chances of new highs being established, and so shorting is the only move I possibly would make here - not interested in any longs at the current time. 

Gold continued to move higher today but I would not be surprised of a pullback there soon.   Names like AUY and GG reversed today off their highs and I just think some consolidation makes sense.   It might be getting ahead of itself a bit.   I will likely consider gold if it does pullback because the yellow metal and shorting the indices are the only plays I see that are worth making in this environment.

That's it for me - I remain in cash and didn't watch the market at all today - no need to yet in my opinion.   We could very well be approaching an interesting juncture when those necklines are tested so watch that carefully.   Otherwise, staying in cash remains a solid play.   Good luck, and go Pens tonight in game 7!

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