Monday, January 10, 2011

State of the Stock Market - 1/10/10 - "Beat Goes On"

We saw another positive session today on Wall Street despite some small losses in the Dow and S&P, as stocks fought back (once again) from a weak start and rose throughout the rest of the session to finish with gains on the Nasdaq and Russell 2000.  Volume looks like it will be slightly lower but the intraday action was bullish nonetheless.   Bears continue to be weak overall and until they step up and can prove they are capable of taking this market lower, stay with the trend which is obviously up.

Technically, support was tested (once again) on both the S&P and Nasdaq but held (once again) and as such, the trend remains in tact.   As I said in the video last night, I have no idea how long this move will last, but it really doesn't matter in the long run.  As traders, we have no way of knowing for sure what will happen tomorrow, next week or next month.   We just have to take the information in front of us and try to move with the market.   Right now, the market is moving higher and there is no reason to be doing anything other than riding it here.

These intraday "selloffs" we've seen the past two days could actually be very constructive, as the market could be digesting gains while at the same time moving higher (if that makes any sense).   In the 2010 move from April to May, we saw a lot of action like we saw the past two days where stocks opened lower but then rallied to take back most of the losses and in some cases finish positive.   Back then, overbought readings were popping up everywhere, but those intraday moves acted as the pullbacks and were what allowed the market to continue to move higher without much "on the surface" consolidation.  Perhaps we're seeing the same thing here.

The only bearish aspect I see right now is that gold continues to look very weak and its chart looks like a potential short (if you're inclined).  It flashed a sell signal last Tuesday and has yet to bounce back at all.   It is forming a clear bear flag and needs to rally soon if it doesn't want to see lower prices.


In terms of individual stocks, there were further gains today in several stocks highlighted here over the past week.   REDF (which was highlighted here) is now up 26% over the past four sessions.  Unfortunately, I did not enter this stock, but one current position of mine was up another 8% today (in addition to 16% gains last week) after being highlighted in the "Top 11 Stocks of 2011" video last week.   From yesterday's video, there were some decent moves today - JAZZ (+8%), KH(+4%), SPRD(+4%), NFLX(+4%), DECK(+3%) - while only SVN was what I would consider a "sell", moving lower 4%.  

I continue to hold my four long positions and will look to add as my buy scans reveal candidates.   Right now, I am fighting the urge to take profits on a few positions as I think this is my biggest weakness as a trader - not being patient enough when positions are entered properly and not following my own sell rules.   When the market wants to move lower, it will likely tell us, but now things remain bullish overall so I wouldn't fight it, especially when there are a lot of nice-looking charts out there.  Good luck Tuesday.


Doctor Stock said...

Well done... an interesting day on the markets and with those little bumps up, you now have some cushion to enjoy profits if they run. Nice!

Anonymous said...

Excellent analysis!