Monday, June 21, 2010

State of the Stock Market - 6/21/10

A nasty day today on Wall Street, as stocks gapped up at the open, putting themselves in very overbought territory, and then proceeded to sell off for pretty much the rest of the session.  There was a bounce late that took stocks off of their lows, but the intraday action was very bearish and the pullback that I've been saying would be beneficial may happen soon, starting today.   Volume was lower - that's the only positive about today's action.

Technically, a big gap up after a huge run is always worrisome, and that proved to be true today.  The S&P and Nasdaq were not able to get up to their 50 day moving averages, but they came mighty close before reversing.  The Dow hit its 50-day almost exactly before reversing hard.   The market is still overbought short-term so we could see further pullback from here.   Although today's reversal looks bad on the charts, we have to see if we get some follow-through before considering this rally dead in the water.   If the S&P holds 1100 and the Nasdaq holds 2270ish, then the bulls still have a chance to make higher prices.  If those break, then I think all bets are off.

My market numbers actually did turn bullish across the board early in the session today, but only one remains bullish after today's reversal, so I am basically neutral on the market here.  A quick, sharp reversal on the breadth numbers I look at is typically not a good sign.   I will keep an eye on them over the next few days to see how they react, but much like the technical picture, if the bulls don't show some strength or if the market sells off on heavier volume, perhaps that right shoulder that everyone sees as a possibility right now could indeed form.  The breadth numbers will certainly deteriorate if we get more selling soon.

I made two trades today, both from the long side.   I knew it was risky getting in with the market overbought, but neither of the stocks were very overbought and I wasn't chasing overextended stocks, so I went with it.   I went into CVGI this morning with a small position around $12.20.....or so I thought.   When I entered my market order, the stock was at $12.20-12.21.   When my order had filled, it jumped $0.30 instantly, so I was filled at $12.54.  I have no idea why I got that bad of a fill - it's not like volume was extreme and the stock was moving super fast.   I would not have bought CVGI up there because it made the risk too high, but I was stuck with it at that point.  Thanks Scottrade for the great execution!  I also entered YGE at $10.86 as it was trying to poke its head above key resistance.   Both stocks reversed along with the market and I will likely be stopped out soon, although I currently still have both positions.  

We'll see what the market has in store for use tomorrow - today's action certainly looks bearish and we have to look for follow-through.   Watch those support numbers mentioned earlier to see if they hold.   A pullback was overdue, but ideally we wanted to see a calm one, not one like what we saw today.   This remains a tough market to play.  Good luck tomorrow.

No comments: