Monday, October 4, 2010

State of the Stock Market - 10/4/10

A down day today on Wall Street, as stocks slid steadily lower through the morning hours.   They hit a bottom intraday around lunchtime and then managed a slow, weak bounce into the close, taking the indices slightly off their lows for the day.  The losses were large but volume as of now looks to be lower.   If it is, that takes a lot of the sting off the losses.

Technically, if you follow me you know I've been looking at a break of the 9 day moving average as significant on the indices.   Today we got it, but as I look at the charts, I don't know if it will end up being that significant.   What I was watching for was a major breakdown where the 9 day was sliced through with ease along with possibly the 20 day, much like we saw on April 27.   That was not what we saw today.   Volume wasn't heavy either.   The Russell 2000 continues to look bearish overall compared to the other indices, but one positive today is that retail outperformed on a relative basis and got support right at its 9 day.   For a sector that has run so much not to get taken to the woodshed on a day like today is good news for the market. 
S&P 500
 Retail
Charts from Telechart, Courtesy of Worden Brothers, Inc.

I also did not see too many breakdowns today (VMW, MELI, CMED, and AKAM were the only really bad ones I see) and actually saw some stocks mentioned last night like ACOM and LVS move higher today.   I would take that as a positive as well - I expected more overall damage to individual stocks with the market being down almost one percent but I don't that much.

More than anything, I think we are still in a consolidation phase until proven otherwise, although it is possible we are just dripping lower and will continue to do so without a one-day shock move.   Really, as long as 1125 and 2300 hold on the S&P and Nasdaq respectively, I would remain neutral to slightly bullish.  I actually bought some CRM today near the close at $111.86 as such, although I remain mostly in cash.   IDSA took a hit today but got support at its 9 day and my stop was not hit, so I hold that as well.

Overall, I am not nearly as bearish after the selloff today as I thought I would be.   I was expecting worse I guess and therefore my short-term outlook changed somewhat.   We could still sell off further, and again, if those support areas are broken, then all bets are off.   But with a market that ran as fast as this one did recently, a pullback is normal and healthy and perhaps that's just what we are seeing here.   We should know more tomorrow - do we bounce back a bit or continue to sell off.   Good luck Tuesday.

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