Friday, August 27, 2010

State of the Stock Market - 8/27/10

On the surface, it looked like a pretty active and eventful day on Wall Street today, as stocks fought off a weak open, tested support at the bottom of this week's trading range and rose sharply in the morning, and then steadily higher in the afternoon.   The overall picture, however, didn't change much for me today even with the gains, as the main two indices closed right below key resistance and the possibility of them just consolidating before heading lower remains strong in my opinion.

The numbers to watch right now are as follows.   2155-2160 are the former support levels for the Nasdaq that were broken Monday, but based on the past three days, this area has now turned into resistance.  The declining 9 day moving average is also right in this area and I have discussed several times this week how the 9 day can act as a blanket on a downtrending market.   Oh yeah, a downtrend line is forming from the August highs and is also sitting in this area.  The situation is pretty much the same with the S&P - only the numbers change.  1067-1069 is the area that is very important here, and the 9 day is sitting right there as well, as well as the downtrend line.   The market closed right below these numbers today (2153 and 1064) and until it closes above those, I have to think we are just seeing a reflex bounce here.   If we gap above those Monday and hold the gains, I would then change my opinion, although then the 50 day is there as potential resistance as well.
 S&P 500
 Charts from Telechart, Courtesy of Worden Brothers, Inc.

I remain in cash as I was away from my computer most of today, but based on the intraday action this week, I don't think I missed much.   This week defines what "chop" is in the market - we've been all over the place but went nowhere - and although I'm sure day-traders had fun, for swing traders such as myself, it's a tough environment.   In hindsight, I am not upset about closing out my shorts on Tuesday as I know I would have been stopped out much higher later in the week.   I am not even upset about my longs that were stopped prematurely on Tuesday and Wednesday, because I would have been out of most on Thursday. 

Next week should be interesting as we hopefully will see some increase in trading volume as August ends.   Although I am still leaning bearish, I am not locked into any outlook - if we see a breakout that holds, then I would consider longs again.   Right now, as long as we're under resistance, I think looking for shorts makes more sense however.   Good luck next week - I'll see you this weekend at some point with a video.


Anonymous said...

Hi Mac: Great postings! Are you seeing APWR bottom here? Thanks a lot!

Mac said...

I don't know about that - it broke key support this week around $6.80 on heavier volume. Based on that, I would say no. I would have to see it close above the 50 day moving average to think that it has perhaps put a bottom in - just my opinion.