Friday, October 8, 2010

State of the Stock Market - 10/8/10

We had an up session today on Wall Street, as stocks fought off a flat open and climbed slowly throughout the session.  They finished near their highs for the day and it looks like those gains will come on higher volume.   It seems like expectations of further "quantitative easing" by the Fed took precedence over a weak jobs report.

Over the past two days, we've seen the market fight off the major selling seen on Wednesday in many important leaders and continue to consolidate (in the case of the Nasdaq) or continue to rise (in the case of the S&P and Russell 2000).   Based on the action, I was wrong in expecting a big move lower soon.   It may still happen, and I said I was watching for it, not necessarily predicting it, but that was my hunch and it was wrong.   Does that mean we are in the clear?   Maybe, maybe not.  I like seeing the Russell 2000 outperform the other indices the past few days - perhaps money is going to rotate into smaller caps now, which would be a major plus.   Retail, a leading sector, also continues to consolidate bullishly and that is a plus as well.

As I said yesterday, earnings are now going to take center stage and for the next two weeks, technicals likely won't matter much.  I won't be trading a ton during that time period, at least until the big boys report and the market has digested them.   It is just a personal preference of mine.   I won't stop completely - for instance, I added a bit to my IDSA position today on the move up - but I am going to be much more selective.   I would advise the same - with the amount of news that is going to be moving the markets soon, it will become very difficult to predict which way we move from day to day.  

Enjoy the weekend - the market has responded pretty well the past two days but earnings now become the main variable.   Who knows what they will be and more importantly, who knows how the market will react?   We'll find out soon.   Take care.

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