Thursday, October 7, 2010

State of the Stock Market - 10/7/10

The overall market did a whole lot of nothing today - both major indices chopped mostly sideways today and ended up basically flat.   The S&P and Nasdaq both remain above their 9 day moving averages and therefore you still have to respect the bullish trend somewhat.   Volume was lower.

This will be a short post because my outlook from yesterday basically remains the same.   With gold putting in a potential reversal (at least based on volume today) along with the dollar remaining very oversold, I think there is a lot more risk to the long side here than the short side.   I am still bothered by the number of leaders that broke down yesterday - way more damage than I wanted to see.   Maybe that won't mean anything, but usually it does.   I am still long IDSA but remain otherwise in cash waiting to see where we go from here.   I would remain cautious on the long side.

 Charts from Telechart, Courtesy of Worden Brothers, Inc.

I also remain mostly in cash because we are starting into another earnings season.   That is good in one way because opportunities will present themselves if you watch carefully - smaller companies will post major surprises and begin long moves upward based on that earnings catalyst.   However, the first few weeks (when the big boys report) tends to just be extremely volatile and also extremely unpredictable, and for that reason, I don't get too involved.   Just a personal preference of mine - if I see a setup that I really like, other earnings reports won't prevent me from taking a position, but I am much more careful in what I choose during this time. 

I believe we also have a jobs number to deal with tomorrow, so there is plenty of gasoline to throw on a potential bullish or bearish fire.   Sometimes these days that you expect to be big one way or the other turn out to be duds, but I don't expect that tomorrow.   As such, be careful out there and make sure you honor your stops.  Good luck Friday.

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