Wednesday, August 18, 2010

State of the Stock Market - 8/18/10

Sorry for the late post, but we had friends in today from out of town and spend the day enjoying each others' company and watching our kids act crazy.   We had some positives and negatives today on Wall Street - the day started out very poorly with selling carrying over from late in Tuesday's session, but the bulls were able to bounce back and take stocks up to challenge yesterday's highs from Tuesday by the afternoon.   Once again, however, we saw a weaker close which left stocks in the middle of their daily range.   Volume was lower.

Technically, we are building a little two day range here and basically today's highs are important to watch as well as Tuesday's lows.   A move above or below will likely determine the next move for the market.   I am just going to show the charts below and you can draw your own conclusions.  

S&P
 Nasdaq
 XLF
Charts from Telechart, Courtesy of Worden Brothers, Inc.

One thing that wouldn't surprise me is for the market to break out tomorrow above today's highs (and in the process making shorts cover) and then reversing hard in the afternoon right back down (to screw with those buying the "breakout").   That would certainly be frustrating, but isn't that what the market is best at doing.   Tomorrow also in another Permanent Opens Market Operations Day (POMO for short - please check out this article from Zero Hedge for more information) so I will be interested to see if we get another ramp up out of nowhere. 

Right now, I still have all three of my shorts in place (AAPL, BIDU, LVS) and BIDU and AAPL in particular still look weak to me here.   If the market falls, I think they will work nicely.   I posted a chart on Twitter today of why I am shorting LVS, and I am sensing it will pullback nicely as well IF the market does likewise.   That's the problem.   I have a sneaking suspicion tomorrow will bring some volatile trading that will frustrate not just me as a bear, but those out there that are bullish as well.   I hope I am wrong, but that's what my gut is telling me.   Based on the charts, I still think we are working off last Thursday's sell off in a choppy manner that will eventually resolve itself to the downside.   I just don't know if the charts will be correct this time.   Take care and best of luck Thursday.

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