Thursday, August 19, 2010

State of the Stock Market - 8/19/10

Not a good day today on Wall Street, as a bad jobless claims number started the market out on the wrong foot, and from the open, stocks were not very strong.   The morning featured a steady and systematic sell off until a little before lunchtime.   Stocks moved sideways then for most of the afternoon, but did try to break out and bounce a bit during the final hour of trading.   Unfortunately for the bulls, the sold back off into the close and finished slightly off their intraday lows and with large losses.   Volume was much heavier.  

Technically, so far, the week has been playing out relatively close to what I described in this past weekend's video.  We had a choppy bounce Monday, Tuesday, and Wednesday before some real selling came in today.  However, much like the bulls could breakout Tuesday and Wednesday, the bears could not bust through Monday's lows today at 1069 for the S&P and 2155 for the Nasdaq.   If they can't take them out tomorrow, then my guess is that we just chop around a bit more next week and really go nowhere.   If those lows are taken out tomorrow, then I think there is a very good chance the June lows will be tested quickly.

Although the indices haven't broken Monday's lows, the financials did today and look to be leading this market lower - down over 2% today.   I pointed this chart out in last night's summary and right now it certainly does not look good.  The Russell 2000 also outperformed to the downside today with a 2.5% loss and that is not a bullish sign either. 

 Chart from Telechart, Courtesy of Worden Brothers, Inc.

I didn't make any trades today because I am pretty much as short as I feel comfortable being with AAPL, BIDU, and LVS.   I tightened my stops in these positions right now because I don't feel like holding on much longer if this market decides it just wants to chop around some more.   I am looking for immediate follow-through to the downside here and without it, I will likely cover and take small gains. 

Tomorrow is options expiration but lately those have been snoozefests - we'll see if tomorrow is different.  I am hoping we can get a trend going soon, even if it is a downtrend, but we are still in the summer so it will tougher.   With all of the economic news coming out looking bad, I am not quite sure what the bulls have to hang their hats on longer term beside the gov't intervening with more stimulus, but maybe they have some trick up their sleeve.   Sure looks like we are going lower, however.  Be careful.   Good luck Friday.

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