Wednesday, July 28, 2010

State of the Stock Market - 7/28/10

Another pullback day today on Wall Street, but once again that's not a bad thing.   Stocks sold off a bit to start the session, but then bounced into and through the lunch hour, with the Dow turning briefly positive.   Starting at 1:00, they started selling off again, but a late bounce in the final thirty minutes took them off their lows and left them with decent sized losses.   Volume was light and the selling did not appear heavy really at any time during the day.

Technically, the past two days have been completely normal and no technical damage was done.   Given how overbought we were, the action has been pretty darn good.   Support-wise, I would like to see the markets hold their 9 day moving averages around 2250 and 1097 on the Nasdaq and S&P respectively.   Really strong moves typically get support at this very short-term moving average, and hopefully we are in the start of a really strong move upward.   If those levels happen to be broken, I would then look for 2235 and 1080 to be key levels, as a break below the 50 day moving average might signal more than just a normal pullback. 

There was one really nice earnings play from last night that for some reason I passed on but figured I would share as a lesson about what to look for in earnings plays.  SIMG released after-hours yesterday and posted earnings of $0.03 per share - not that impressive but it was against estimates of -$0.03 (a 200% surprise).   Estimated growth is strong for the future as well.   The chart was not extended - in fact, it was rather beat down, but that is a good thing.   The surprise pushed it much higher today and this is definitely one to keep on your radar for a flag to form.   I may have passed because it was such a low price stock - I really don't know.   I could have gotten in around $3.85 last night and it will close today around $4.30.   Not bad for less than 24 hour swing.  For tonight, here are some possible names to watch based on current chart patterns - CTXS, NETL, CCI, WGOV, ORLY, TLEO, SKX, TMK, TQNT, HMN, IRBT, SFLY, FIRE, GPRE, and GMCR.

I am still in my QID and SDS positions but may take them off tomorrow - I still think until proven otherwise that this pullback looks extremely constructive and that perhaps it is just a matter of time before we start moving higher again.   I hope that's the case, because there are quite a few setups that good (many recent earnings plays that have rested nicely the past few days) and I would be fine with entering several of them in a more aggressive manner if the market cooperates.  We'll see what tomorrow brings, but another day or two like today would be perfect.   Take care and good luck Thursday.

No comments: