Thursday, October 21, 2010

State of the Stock Market - 10/21/10

A volatile day today on Wall Street, as stocks started the day higher, fell from around 11:00 to 2:00, but then bounced into the close and finished very close to where it started overall.   The early move higher did take the S&P and retail sector to new highs, but those highs did not last long.  Volume appears to be heavier than yesterday on the Nasdaq but flat on the S&P.

Technically, this remains a very news-driven market and as such, it is hard to look at the technical picture without taking it with a grain of salt.   Things are very volatile and will remain that way as long as these earnings reports continue to come (and we have another large wave tonight).   I would not be stuck to any one outlook right now as really, anything can happen.   We have yet to breakdown and the trend remains up, but there are a few worrisome signs out there that have me cautious.

As you know, I've been talking about the breadth indicators I use (via Stockbee) and how they've been flashing warning signs for a few weeks now.   Those warning signs remain, but another one turned neutral this week after being bullish since the beginning of September.   It did the same thing back in mid-March, but never went bearish and eventually the market went higher for almost another month before topping out.   Perhaps it will do the same thing now.   That's really what I am watching for - further deterioration here on this signal would have me looking to get short, but I will wait for it.  I am not going to anticipate it.  


I am back to 100% cash after selling my ALGN position for a small overall gain near the end of the session today.   With earnings coming out after-hours and some less-than stellar action intraday, I had no desire to hold through earnings.   I guess I am lucky, because it is trading down about 15% from its close right now.   The key reports I was watching today are mixed - AMZN and INFA look to be down while RVBD, SNDK, and CMG are up.   Probably another day of volatile trading is in store overall for tomorrow.  

I will update you if my signals change, but as of now they are neutral and so I remain in cash.   I would not be surprised of some chop here that eventually leads to higher prices, but a lot of signals are pointing to a top potentially forming here, so be very careful.   Good luck Friday.


Pradeep Bonde said...

Nice visual presentation of data. Are you using Excel or Google Spreadsheet to do this?

Mac said...

Hi, Pradeep. I am using Excel for this. The only problem I have is that I have to change the data range in the charts whenever I want them visually updated. There is something you can do with dynamic ranges or something that would allow the charts to be updated automatically, but I haven't figured it out yet.

If you want a copy, email me (since you provided the ideas for the MM anyway).

Pradeep Bonde said...

Send me the spreadsheet I will ask Skytrader and his Tech team to have a look at it and try and build auto script for it.