Wednesday, September 1, 2010

State of the Stock Market - 9/1/10

A very bullish session today on Wall Street, as stocks started the day significantly higher and build from that open to establish large gains of almost 3% by the time the market closed.   The intraday action was actually slow for most of the day, as stocks just moved sideways from about 10:30 on, but nonetheless the gains along with an increase in volume qualify this as a follow-through day that puts the market back in rally mode.   As always, that doesn't guarantee anything, but it is certainly a plus.

Technically, key resistance was quickly dealt with today by the bulls, taking us out of the week and a half long trading range we've been in on the Nasdaq and S&P.   That certainly bodes well for higher prices over the next few weeks.   One thing I will point out, however, is that the S&P stopped right at its 50 day moving average today around 1080.   It would be a little different if the market rose steadily throughout the day and closed right there, but the fact that we rose quickly to that level and then went no further could be meaningful.   Perhaps this resistance will take a few days to get through.   The Nasdaq did the same with its 20 day moving average around 2177 - got to it and then just sat there.   A little rest here is not a bad thing if it happens and doesn't mean today's move won't work. 

 Charts from Telechart, Courtesy of Worden Brothers, Inc.

I don't know if it is just me, but my volume totals are extremely weird today with Telechart.   It shows volume on the S&P as being the highest of the year and more than twice as high as yesterday.   Meanwhile, it shows the Nasdaq as having heavier volume today but not anywhere near as heavy as the S&P.   It also shows volume on the Dow coming in less than yesterday's totals.   Maybe this will clear up later, but it is confusing me right now.

As for the gameplan, I remain in cash as of now as only one of my two main indicators for breadth turned bullish today.   However, the other will likely turn bullish soon (baring a big collapse here), so my outlook is to look to buy as opportunities present themselves.   I have no way of knowing if this is just going to be another fake-out that does nothing more than keep us in our trading range, but the signals are there so I have to go with it.   I have three or four names that I am watching closely and may enter a few positions tomorrow.   There are a lot of leading stocks acting very well right now(ISLN, NFLX, CRM, CMG), and that is another positive sign.   I will be going over my scans closely tonight to find others that may work if the market decides it wants to move higher.   As of now, that's what it seems to be saying, so you must respect it.  Good luck Thursday. 


Jeremy said...

You mentioned two of your breadth indicators turned bullish. Do you mind sharing more about it? what kind of indicators do you use ?
thanks, as always

Mac said...

It is very similar to the Market Monitor used and developed by Pradeep Bonde at Stockbee. It basically tracks breakouts of different magnitudes over the course of different time periods. He has written a lot about it and out of respect to him, I would encourage you to check him work out personally.