Tuesday, August 10, 2010

State of the Stock Market - 8/10/10

A volatile Fed day today on Wall Street, as stocks started the day much lower, but then bounced slightly and moved sideways through lunch and into the actual decision around 2:15.   After the Fed released their statement, things got very choppy as they typically do, with stocks bouncing sharply but then giving back about half of those gains during the final hour of trading.   Overall, stocks finished with losses but in the middle of their intraday range.  Volume was heavier than yesterday's putrid totals, giving the indices another distribution day.   By my count, that makes six for the Nasdaq and S&P in the last month, always a worrisome sign.

Although there was a lot of intraday movement today, very little changed with the overall technical picture of the markets.   Except for the Dow, which continues to lead, the indices are still below their June highs and are also forming bearish rising wedges.   The bottom trendline of that wedge held once again today and until we get either a breakout above or breakdown below these resistance levels, we are in a choppy, tight range and that's all you can really say.   Numbers to watch for the Nasdaq to the upside are 2307 and then 2341, with downside support now being put in at today's lows (2277).   For the S&P, the numbers to watch to the upside are 1131 and then around 1145, which is the top of this rising wedge pattern.   I've talked several times over the past few days how I think a breakout could hit resistance quickly in that area.   To the downside, today's lows (1087) need to hold.

 Chart from Telechart, Courtesy of Worden Brothers, Inc.

I was away from my computer today for most of the day, mainly on purpose because I knew this was not a day where a lot of money could be made easily.   My breadth numbers are still bullish, and with the exception of ABR, I do not see any breakdowns on my long watchlist today that are worrisome.  It's just that I don't see any stocks breaking out and holding their breakouts as well, which makes things tough.   I am hopeful that we are setting up for a big move one way or the other on the markets that will be tradeable - on the surface, that sure looks to be the case.   However, in this ultra-low volume summer environment, I also understand that we could continue to just chop sideways for the next few weeks with some false breakouts and breakdowns thrown in for fun.   That would frustrate everyone, including me, but the market will do what it wants to do.  Be careful out there - it is not an easy market by any stretch.   Good luck Wednesday.

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