Friday, September 3, 2010

State of the Stock Market - 9/3/10

Another very bullish session today on Wall Street, as a positive jobs report caused stocks to gap up to open trading.   That enthusiasm did not last, as stocks quickly and sharply pulled back, but managed to grind their way back starting around 11:00, and ended up finishing near their highs for the day and with large overall gains for the third straight session.   Volume however looks like it will come in lower again and well below average.

Technically, we are at a very interesting point right now.   My numbers are all bullish so let me make it clear - I am not a perma-bear or anything like that at this moment.   I have to go with what my numbers say so if I was trading heavily here, I would be long and only long.  That being said, the major indices are short-term overbought and are now right at key resistance from the declining tops line from back in April.   Check out the charts below for a clearer picture.
S&P 500
Nasdaq
XLF
Charts from Telechart, Courtesy of Worden Brothers, Inc.

As I quickly look through my scans today, I see a few worrisome signs in the short-term.   I posted several setups this weekend and during the week that I considered worthy of watching and so far, several have acted very well.   SVN, for instance, had a big move today and is a stock I would have likely entered if my work situations were different right now and I was able to follow things intraday.   However, I also see some stocks from my main watchlist (LFL, PWER, NANO, FIRE, IGTE, CTCM, ACTG) that had either weak breakout attempts today that reversed or just reversals intraday that they did not bounce back from.  This tells me stocks are getting a bit tired here and perhaps caution is warranted in the very short-term.  

I remain in cash and basically will look for a pullback here as a buying opportunity.   There is now support (or what should be support) below around the 50 day moving average for the indices, and as long as that holds, I think you buy.   I just wouldn't chase at this juncture.   Who knows - maybe everyone is looking for a pullback and the market keeps grinding higher - we've seen that story before - but I would rather wait.   Enjoy the Labor Day weekend and I'll be back Sunday or Monday with the market outlook video. 

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