Monday, November 29, 2010

State of the Stock Market - 11/29/10 - "Still Going Nowhere"

A good day overall today on Wall Street, as the bulls fought back from some heavy early selling to post only modest losses and in some cases, little loss at all.   The day started with a gap down and some continued selling from that gap for about the first hour of trading.   From there, stocks moved sideways until a bit after 2:00, when they bounced back into the close and finished near their highs for the day.   Volume looks to be heavier than Wednesday's totals. 

Technically, there was some key action today on the S&P, as it tested key support at 1173 (recent lows) and also at its 50 day moving average.   Since it bounced strongly off of that support, it passed the test with flying colors.   However, they are still below their short-term moving averages and follow-through will be the key.

The Nasdaq and Russell 2000 also bounced off of their lows but the technical action was more significant on the small caps, as they tested their 20 day moving average again and passed.  The Nasdaq overall is a mess - not really bearish, not really bullish - just a mess.

Commodities were fairly strong today across the board with the dollar getting quite extended here and overbought (at least according to UUP).   This bodes well for further bullish action over the next few days - the rise in the dollar has coincided strongly with the recent overall market pullback.   Perhaps the bulls need the dollar to sell off before taking back control of things overall.  

 Charts from Telechart, Courtesy of Worden Brothers, Inc.

I made no trades today and until this Scottrade mess gets resolved, I won't be trading.  That doesn't mean you can't.   I didn't see a ton of great setups this weekend but one from the weekend video (CPE) was up nicely.   I see some that look like they want to pop (CVGI, CCME, and SM stand out to me right now), so if you're looking for longs, there are some ideas. 

If I had to pick a side going into tomorrow's session, I would side with the bulls simply because the dollar looks tired, but really, what matters right now is seeing some follow-through.   In the past nine trading sessions, we've seen four moves of over 1.4%, and that's not counting today's big intraday reversal.   The problem is that two of those moves have been positive, and two have been negative - in the grand scheme of things, we've gone nowhere.

My basic outlook in the weekend video was that I expected more chop over the next few weeks, perhaps even into the new year, and for now I stand by that.   Until one side can put a few strong days together in a row instead of this back and forth crap, I think cash remains a pretty good option, at least for swing traders like me.  The numbers I follow are neutral, so I guess I am as well. Good luck Tuesday.

** If you're wondering about Scottrade, I have still not received their "official" response via U.S. mail yet - today was the fourteenth business day since the original email was sent and received.   I guess the part of their email response that said "You will receive a written response via U.S. Mail directly from our Compliance Department in approximately seven to ten business days" was a typo or something on their part.  Yep, great customer service there at Scottrade.  

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