Thursday, September 16, 2010

State of the Stock Market - 9/16/10

A slow and choppy day today on Wall Street, with stocks moving slightly lower in the morning and then recovering in the afternoon to finish basically flat for the session.  Volume looks like it was ridiculously low today compared to the past few sessions but I don't have the final totals. 

Technically, the charts are diverging here a bit as both the S&P and Russell 2000 have consolidated slightly the past few sessions and look good to me.   I have been harping on the need for the market to digest their recent move higher if this rally is going to last a while, and I think those two indices have done that for the most part here.   That's not to say further consolidation would hurt, but who knows if we'll get it.  The last three session have worked off some of the overbought condition in these two indices.   A breakout is a real possibility soon based on the way the charts look.  

S&P 500
Russell 2000

On the other hand, the Nasdaq and particularly the Nasdaq 100 (up 11 out of the past 12 sessions after today) continue to extremely overbought and the consolidation seen on the other two indices has not been seen in the same manner here.   It is possible we're entering a phase like we saw back in February and March where the market ran higher without any rest, but even then, eventually the 9 day moving average came in and offered support.   Right now, that's where I would be looking to buy - let the 9 day at least catch up to price a bit so you aren't caught in a quick downturn or sharp pullback.   

Nasdaq 100
Charts from Telechart, Courtesy of Worden Brothers, Inc.

In terms of individual stocks, I see some ones that interest me (I'd say about six) but I also still see a lot wedging higher.   I put two charts of leading stocks below.   You can figure out which one looks better and which one I would worry about.   I am seeing a bit more of these extended stocks rest over the past two or three days which is good - hopefully there will be more and we can find some safer buy points.  

Charts from Telechart, Courtesy of Worden Brothers, Inc.
Tomorrow is options expiration and lately those sessions have been quiet.   A quiet day tomorrow would be very good for the market in my opinion.   If the S&P and Russell continue to consolidate and the Nasdaq takes at least a short break, the market is definitely set up for higher prices.   Let's see if it happens.  Good luck Friday.

1 comment:

SStrader said...

Im leaning toward the market dropping for a couple weeks but it seems like most traders are about neutral. I just dont see a whole lot of strength. Overbought stochastics for S&P500, trend line showing its stopping power as resistance. From my point of view stocks are starting to turn down and any day a big drop MIGHT commence.

i guess we will see what happens!