Tuesday, June 29, 2010

State of the Stock Market - 6/29/10

Nasty stuff today as stocks fell hard and cut through some key lows with relative ease on Wall Street.   Futures were down big this morning and the market gapped lower and continued to sell off for the first hour or so of trading.  They moved sideways for most of the rest of the session, holding above key levels of 1040 and 2140 on the S&P and Nasdaq, but then broke down further in the final hour, closing with major losses.  Volume will come in a good bit heavier.

After today, if you're holding onto any hope of new highs in this stock market and a true bull market starting back up soon, you must be smoking something.   Sure, we will have some bounces here and there - for all I know, we could gap up tomorrow 1-2% and kill shorts just for the heck of it - that's still the type of market we have here.  The 1040 may end up being defended one more time and that is one reason I am hesitant to short here.  Overall, however, I do believe the bear market has officially started back up after a hibernation period between March 2009 and April 2010. 

I say this not simply because the market was down today, but mainly because leaders died all over the place today.   There was more carnage on individual charts today than I have seen in a while.   Check out BIDU, AAPL - two of the biggest names out there and both were crushed technically today.   Smaller leaders like CMG, SKX, HMIN, CTRP, RDWR, LVS - all were holding up very well until today when they were also crushed.   During last week's selloff, most individual stocks pulled back but did so in a relatively calm manner, leading some (including myself) to believe that perhaps the bulls still could take control of things.  After today, I don't think that is going to happen. 

 All Charts from Telechart, Courtesy of Worden Brothers, Inc.

I posted earlier today a comparison of this market to the 1930 stock market - make sure you check it out.  If history is repeating itself, we are in for a very difficult market for not only the next few months, but the next few years.   Shorting and cash are really in my opinion the only two options you have right now, for although there will be bounces, they will be difficult to play and difficult to time.   Only the nimblest and bravest of traders should be thinking of going long and trying to catch these falling knives that are seemingly everywhere.

I remain in cash and will continue to keep most of my account in cash, but I may try a few shorts depending on how brave I feel.   Names like BAC and JPM are ones that could just be breaking through key resistance soon and are not that oversold.   Shorting here is risky due to the possibility of a reflex bounce but it could work.   It really depends on how much risk you want to take.   Whatever you do, be careful because it looks like we're back in bear territory based on a number of factors.   Take care.

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