Monday, December 13, 2010

State of the Stock Market - 12/13/10

Not a great day today on Wall Street - the market tried to rally a bit early in the session but at no point could really get something going.   The final hour of trading was particularly negative, with both the S&P and Nasdaq selling off and finishing at their lows for the session.  Volume appears to be heavier, and that would give the Nasdaq a distribution day, as it underperformed the other indices and finished with losses.

Technically, both the Nasdaq and Russell 2000 finished with losses today (albeit small ones) and as I mentioned this weekend, the markets are looking extended and after today, perhaps  a bit tired.  I guess being up eight days in a row like the Nasdaq just was will do that to you.  No damage was done today and there are still no clear signs that the bulls are losing control of things - we just may pullback or consolidate a bit here.   That is normal.   Watch 2600 on the Nasdaq and 1225 on the S&P as potential bounce areas (9 day moving averages) over the next few days.   If those would happen to be broken, then I would reconsider my stance. 

One interesting development today is that the dollar broke down once again from what now looks like a bear flag, but the market didn't follow in kind (meaning higher).  Silver was up strong in correlation, but gold and oil were up only slightly, which is also interesting.  Perhaps this is another sign that this market is a little tired here - when the dollar puts in a big move lower and the market doesn't respond by moving higher, you should pay attention.

Charts from Telechart, Courtesy of Worden Brothers, Inc.

Although I recommended caution on entering new positions at the start of trading today, there were a few nice moves today from the weekend video.   CCME, GMXR, and CGNX moved early with gains of 7, 6, and 5% respectively (although not all closed well).   RITT was one breakdown from today - the 9 day moving average did not hold on a closing bases for the first time in a long time so I would take it off the watchlist for now.

We'll see what tomorrow brings - no need to sell if you are long from two weeks ago, as we still haven't seen anything that tells us this move is over.   We are a bit extended, however, so chasing stocks early today probably got you into trouble.   If we do get a dip, it will likely be a buying opportunity, at least based on what the market is telling us now.  If things change, I'll let you know.  Good luck Tuesday.

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