Tuesday, May 25, 2010

State of the Market - 5/25/10

Another crazy day on Wall Street today, as stocks finished well off their lows for the second time in three sessions.   The day didn't start off well at all with a large gap down at the opening bell.   There was further selling during the first ten to fifteen minutes of trading, but around 10:00, stocks did manage to rally and continued higher throughout the rest of the session, finishing with small losses but well off their lows for the session.   Volume looks to be heavier than yesterday's light totals.

I said this morning on Twitter that I expected a major selloff (perhaps historical in nature) this week due to the huge gap down this morning.   As of now, I certainly appear to be very wrong.   I think my rational was OK - a market that can't rally in the face of historically poor breadth numbers last Thursday and then breaks to new lows following an attempted bounce Friday is a market that looks (to me at least) like it could really blow open.   That didn't happen today however.   I don't know that this will be the day that we do finally bounce back up (what makes it different than last Friday?) but I guess it is possible.   We've had two reversal bars near important support levels the past three days so as we are still in a position to do so.   I am certainly not discounting the possibility and will keep an eye on the stocks holding up well from this weekend's video.  There are several that I will consider going long with if today's action leads to something positive.

Overall, today was positive, but all I can really take from the action is that this remains a very difficult market to trade for more than a few hours intraday and that's why I continue to stay away from it.  Perhaps a bottom is being put in in this area - it's too early to tell, but it is possible and worth watching.  If we do bounce, 1100 becomes a key number to watch on the S&P.  On the other hand, if we don't bounce (after getting two reversal days) and soon reverse this reversal like we did yesterday, then maybe we do see that washout-type action.   I really don't know - the volatility continues and it makes predicting what will happen next even more difficult.   I'm leaning long for a trade but not married to that thought.  Good luck if you're trading.  

1 comment:

MarshalN said...

In some ways though, today was nothing more than a giant gap fill that took all day.

For all we know we'd be heading down again tomorrow.