Thursday, December 16, 2010

State of the Stock Market - 12/14/10 - "Better Action"

We finally saw a somewhat strong session today on Wall Street, as stocks started flat but were able to climb midday and finish near their highs for the session with decent gains.   This positive action was in contrast to the weak closes we've seen all week, so that is a plus.   Volume as of now looks to be a good bit lower than yesterday's totals, however.

Technically, the major indices look like they have put in a nice bull flag here over the past week, resting right on the 9 day moving average before bouncing today.  From a strictly visual perspective, the S&P, Nasdaq, and Russell 2000 look quite good after today's action and seemed poised to make more gains from here. 

Nasdaq

If you put the visual appearance of the market aside, however, there has been some weird action this week that I am a little confused about to be perfectly honest.   We have seen some distribution this week (2 for the Nasdaq and 1 for the S&P) but no real damage.  When you accompany that distribution (however slight it was) with some of the breakdowns in individual stocks I talked about Tuesday, I would expect the indices to look worse than they do.   The main breadth indicator I follow also turned neutral yesterday and remains neutral today.   All in all, a lot of weird signals and I don't know what to make of them as a whole. 

Commodities were generally mixed today but gold had a mini-breakdown that would typically have me thinking bad things as well.   Oddly enough, I expect gold to bounce here soon - just a hunch.  Silver and oil held up better with silver bouncing off of its 20 day MA and actually closing slightly higher.   After two positive sessions in a row, the dollar backed off today and looks to just be chopping around right now.

GLD
 Charts from Telechart, Courtesy of Worden Brothers, Inc.

Overall, this has been a weird week and I don't quite know where we go from here.  The indices look good and there is certainly no reason to short anything - I would continue to look for buying opportunities as they present themselves.  At the same time, just be aware that there are some anomalies out there that bear watching, so keep your stops in place and respect them on the long side.   Good luck Friday.

No comments: