Tuesday, October 5, 2010

State of the Stock Market - 10/5/10

A great day today on Wall Street, as stocks started the day higher and did nothing but continue to move higher throughout the session in very bullish fashion.  The move was steady without any pullback and although it flattened toward the end of the session, stocks still closed with large gains of 2% across the board, with the Russell 2000 leading the way (a very good sign).  Volume also looks to be heavier (another good sign). 

Technically, both the S&P and Nasdaq broke to new highs out of what now looks to be a consolidation pattern of the past two weeks.   The Nasdaq closed right at its highs from last Thursday, so it technically has a bit more work to do, but following on yesterday's breakdown, the action today was obviously very positive.   Even better was seeing the small caps break to new recent highs as well - they have been lagging for a while now so if they can get moving, it can give this rally another boost.  

I said yesterday that I was not nearly as bearish as I thought I would be after yesterday's selling, and maybe my hunch was right for once.   Yesterday could have been the fakeout people were waiting for before getting back in long.  As of now, it certainly looks like the dip buyers have come off the sidelines and the market is poised to move higher.   One thing I would keep my eye on however is gold.   It is getting a little parabolic after gapping up today.   Perhaps this is a breakaway gap but it certainly needs some rest.   In turn, the dollar is very, very oversold and beaten down.   A reversal on either of these two could trigger some quick selling so watch for it.
Chart from Telechart, Courtesy of Worden Brothers, Inc.

I am long with IDSA and CRM but didn't add anything today.   Unfortunately for me those names didn't do a whole lot but I am willing to be patient, especially if the market wants to run more here.   I have my eyes on a few other names and will share as I go, but several names from this weekend's video (XTEX, ACOM, LVS to name a few) have been movers and hopefully you've caught one. 

Today was certainly very bullish and it looks like we are set up nicely for higher prices.   The only thing I would worry about is the gold/dollar issue and also the amount of news coming out this week.   I have a feeling we could see some very high volatility this week (as we already have the past two days) so do be careful out there.   Take care and good luck Wednesday.


Anonymous said...


i dont understand your crm buy?

crm formed a diamond top and is now traded below the August highs?

Maybe you can explain me your decision?


Mac said...

It's a big cap leading stock with good fundamentals that bounced off of its 50 day moving average for two days and I saw a low-risk entry with a stop below the 50 day. Pretty simple from where I sti.

Mac said...

I meant "sit".

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Anonymous said...

Hope you sell crm..the stock lost a lot today.