Tuesday, November 23, 2010

State of the Stock Market - 11/22/10 - "Bearish Action"

After a relatively bullish day yesterday where stocks came well off their intraday lows and finished flat to slightly higher, today saw a very bearish follow-up on Wall Street.  Stock gapped down to start the session, sold off further until lunchtime, and then moved basically sideways until the close, coming off of their lows only slightly.  I don't have the final volume totals, but overall it looks like volume was slow.

Although we didn't break to new lows today, the action certainly was bearish and although it is a holiday week, the market could see further selling from here.   The S&P is closing in on what should be heavy support around 1173, but the Nasdaq still has room to fall before it gets close to testing its 50 day moving average around 2450.  It really is hard to predict what will happen the next few days because trade is going to be very light, but the overall picture for the market continues to be iffy at best. 

The worst chart out there right now for the bulls is the U.S. dollar.   A breakout today preceded by a very natural and controlled pullback is not good news for further increases in commodities and likely the market in general. 

Chart from Telechart, Courtesy of Worden Brothers, Inc.

I have yet to go short as I think this week will remain difficult to trade (other than intraday) but overall my signals remain bearish and are actually starting to deteriorate further.  They held in there late last week and yesterday, but today was different.  I am considering starting some short positions soon - I just have to decide if I want to do it in the trading environment that will be the next two days.   Good luck and more importantly, be careful - it's a tricky market.  

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