Thursday, July 22, 2010

State of the Stock Market - 7/22/10

After a very negative day yesterday on Wall Street, we had (what else?) a very positive day today on Wall Street, as stocks gapped up to start the session, added to their gains in a constructive manner through the morning, and then basically consolidated sideways for the rest of the session.   It was not that "calm" of a day however, as stocks sold off hard around 3:15, scaring the bulls a bit before a bounce took stocks back up into the close.  I don't have the final volume totals but it would surprise me if the totals weren't higher than yesterday due to the number of earnings reports traded today.

Technically, the downtrend lines from the middle of March were broken through today on both the S&P and Nasdaq, but only slightly.   Ideally, you would have liked to have seen a real surge into the close today, but with all the big companies reporting after the close (MSFT, CMG, AMZN, AXP, QLGC), perhaps that was too much to ask.  Obviously, follow-through is key right now - the potential for a big move higher is certainly there for the bulls to capitalize on but only if they decide to do so. 

I watched some stocks today and posted a few of the better setups I see on Twitter, but stayed in cash.   I just don't trust anything.  Perhaps this will cost me if we move much higher from here, but if a big move is really at hand here, there will be plenty of time to get in.   Until this massively heavy news week ends, however, I am fine with sitting on my hands.   Trading is often compared to poker, and I think this week's market is very much like playing poker, only after every hand is dealt, you switch tables and are faced with new players around you every time, players you have no knowledge of and have no clue of what to expect from them.  Obviously that would be difficult, just like this market.  

I was not surprised we were up so much today just like I won't be surprised if we are right back down 2% tomorrow.   I know AMZN is down big right now but there's earnings pre-market as well so the whole mix as well as the reaction to it is hard to predict.   I am ready to move if we get some further confirmation of this move up, but I would rather wait for a less volatile environment, which hopefully we will have next week.   Good luck Friday.

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