Thursday, November 4, 2010

State of the Stock Market - 11/4/10 - "Bullish As Can Be"

A banner day today for Wall Street, as traders gave a resounding "yes" to the Fed's plan to print our way out of our economic problems and pushed stocks higher from the get go.   Stocks gapped up and either moved sideways from there, giving little back (the Nasdaq) or moved slowly and steadily higher from the opening gap, finishing near their highs for the session (the S&P).   Volume looks substantially higher today.

Technically, everything looks quite good as you would expect on a day like today.   A quick look at the major indices and sectors will tell you the following....

Nasdaq - New High for Year
S&P - New High for Year
Russell - Clear breakout from range
Gold - New High for Year
Financials - Broke out of long-term range
Transports - New High for Year
Semis - New High for Year
U.S. Dollar - New Low for Year

Across the board, there is really nothing you can say that is bad.   We are quite extended in the short-term and perhaps could pullback tomorrow with poor economic news, but today's breakout should establish some higher support levels for the market to bounce off of in the event of a pullback. 
 Chart from Telechart, Courtesy of Worden Brothers, Inc.

The breadth indicators I follow, which were flashing warning signs for the past several weeks and went ever so slightly bearish last week, turned back to bullish after today's powerful session and so that is another plus.   We were at a point two weeks ago where the market was either going to pullback in a strong manner or work its overbought condition off with sideways action, and since then, there was enough sideways action for the market to set up again now for a new move higher.   Who knows how long it will last, but you must respect it and play it until the trend ends.   The numbers are still extended but not nearly as much as two weeks ago so there is certainly room for the market to move up from here.

I entered two positions this morning, both small, and both in commodity sectors.   I saw a lot of other ones but it is very hard for me to enter many trades due to work conditions so I am still mostly in cash.   I still haven't adjusted well to being an "end of day" trader - it is tough for me to do.   It is something I really need to work on improving.   My guess is that most stocks are too extended at this point to enter, but if I see any, I'll try to share (I wish I shared some last night). 

All in all, today was super-positive and should lead to higher prices.   We do have some more news tomorrow and perhaps it will cause a violent swing down but I expect dip buyers will come in at the former resistance levels we just past.   A few weeks ago, I thought there was a good chance the market was topping out, but I can't say that anymore so just go with it.   Good luck Friday.

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