Wednesday, July 14, 2010

State of the Stock Market - 7/14/10

I was gone for most of today's trading session so the commentary will be brief.   All in all, however, it really doesn't look like a bad day from what I can tell looking through my charts.   The market ran even higher this morning until lunchtime, reversed, but found support around 2:00 and bounced back up into the close to finish basically flat.  With the Nasdaq losing only twenty points from its top to bottom and the S&P losing only ten, I don't get the impression the reversal was very harsh or intense - probably more of just a long overdue pullback.  Volume appears to be a good deal lower than yesterday.

A few more days like today would give a lot more credence to the possibility of a true trend change happening over the past week with the move higher that we saw.   I still tend to think we are more likely to reverse here, but an open like today where stocks ran again was a perfect opportunity for the bears to really take control, and I can't say that they did.  To me, today seems much different than June 21, when the market fell straight from the open and the action was very bearish.   We'll just kind of have to see where we go from here, but I think keeping your mind open is a good idea.   The bears could certainly take control back quickly, but the bulls are also making a case now so let's see who steps up.   The breadth numbers I follow have started to turn bullish again so that has opened my mind as well.   It's not foolproof - the last time they changes was June 21 - but if they stay bullish over the next few days, that would be a good sign.

I'm still in cash right now as I need to see some consolidation before going into any longs and I need to see some confirmation that the bears are strong again before going into any shorts.   I don't think today was any sort of confirmation that way.   Watch 1075 and 2200 for support and as long as those levels hold, I think you lean toward the bulls here, as crazy as that sounds based on what we saw over a week ago.   Take care and good luck Thursday.

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