Tuesday, November 9, 2010

State of the Stock Market - 11/8/10 - "Reversals"

I am exhausted right now from my full-time job so I am not going to write a whole lot today, but there are a lot of things I didn't like about today's action on Wall Street.   I said yesterday that some healthy consolidation like we saw Friday and Monday would be excellent for the overall trend, I get the sense looking through individual charts that there was a little more damage done today than will show up on the final numbers.  

Technically, the trend is still up and as I have said ad nauseum, until we break some short-term moving averages to the downside, there isn't much to do other than look for longs.   We remain above those moving averages as of today's close, so that's good.   What I don't like, however, is the action I see in individual stocks.  

I saw a lot of nice setups and breakout yesterday - I shared some on Twitter after the close yesterday.   Most of those charts, however, reversed very hard today, much harder than the overall market.   BORN gave all of its gains from yesterday back today - not good (I am still in this but my stop may soon be hit).   HEAT had a nice opening thirty minutes, but reversed hard as well and gave all of those gains and some from yesterday back (I was stopped out of this after moving my stop loss up early on).   After nice early moves, gold and gold stocks got killed (I was stopped out of both AAU and REE today).  Maybe my outlook is being skewed because almost all the stocks I was holding got hit.  

What we have to see is if today was just a natural sell-off in extended areas (like the metals) or if it was a potential top in those areas that could have ramifications for the overall market.   Nothing has changed in terms of the trend remaining bullish, but if we get some follow-through to the upside tomorrow with the U.S. dollar and to the downside with the metals, then perhaps we need to worry more.   I would keep a careful eye on those two areas right now - gold and the dollar.   They could be the tell.   Good luck Wednesday.

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