Tuesday, February 1, 2011

State of the Stock Market - 2/1/10 - "Roller-Coaster Ride"

We saw a very positive session today on Wall Street, as stocks climbed throughout the morning and although they plateaued in the afternoon, there were strong gains across the board.   Volume looks a good bit heavier on the Nasdaq, while it .  All in all, a very bullish session and it looks like maybe Friday's extremely bearish action was just another head-fake...maybe.   Honestly, this market is throwing me for a loop the past two weeks as we've gone down, up, down and now back up but really have gone nowhere.

Technically, the S&P went to a new high today for the year but that high came on lower volume (that has decreased each of the past two sessions).   The Nasdaq meanwhile is still below its year to date highs and has some major resistance to deal with around 2766 and 2763.  It should be interesting to see if it can get above those levels and keep moving.  The Russell is in a similar position to the Nasdaq in that it is below its January highs, although it did get above Friday's high today.  By the way, the comparison I have made the past two days to April of 2010 is still valid on the Nasdaq.  If we get a big down session tomorrow, it would stay in line with what happened then.

 S&P 500
Charts from Telechart, Courtesy of Worden Brothers, Inc.

As I look through my bullish scans today, I continue to see less nice setups than I should considering the bounce we've seen the past two days.   The only setup I really regret missing (that I honestly can say I may have played if I looked closer - I don't count ones I know I would have never touched or had a chance with) is HSFT.  It had a nice move today of 10% and acted like I hoped it would when I bought it last week.   My stop was hit Friday due to the overall bearish action.  

Really, besides that, I still don't see many nice setups.  BIDU had a nice breakout but gapping up made entry difficult.  LULU had a move today but I certainly didn't like the way it sold off for a straight week after announcing great earnings. It's weird to be honest, but they just aren't really there.  That's why I again am not quite sure what to make of this move today - it is just another headfake to screw those buying today or yesterday or the start of another significant grind higher that will surprise more traders?  

Overall, all of my signals remain on "sell" based mainly on what happened Friday, but that doesn't mean the market can't go higher from here.  I remain in cash and will continue to let the market tell me what it wants to do.   Throughout 2009 and 2010, traders saw many instances of heavy volume selloffs take place, followed by weak volume rallies.   Most times, those rallies continued longer than most thought they would, and that could happen here.  I am certainly not discounting further gains over the next few weeks.

Basically, I would keep my options open here.   If the Nasdaq gets to new highs soon and the short-term moving averages start to expand upward, then I would start looking for longs.  If we see any more days like Friday, then I would go short as I don't know if this market can continue to bounce back from those days like nothing happened.   I may be wrong, but I really don't think I've missed much from a swing trading perspective this week.   Day trading - yeah, that's a different story - but for what I attempt to do, this market has not presented many opportunities the past week or so.   Really, that's what I want to see more than anything - nice individual setups present themselves.  Hopefully more will soon.  Take care and good luck Wednesday.


Anonymous said...

Thanks for your commentary Ryan!

Anonymous said...

your sell signals remain bcuz the EMA of most stocks have not yet perform upcross yet.

since dow achieved new high, over 11990 (day open 11993 28jan), i will surrender and will just observe it today.

an intraday retracement and then bounce back or even rally to another new high by +20 to +30pts then the sell signal would turn into buy signal again, for my systems.


Mac said...


There is more to it than just the moving averages. Breadth is on a sell signal. Distribution is on a sell signal.

I am not saying we can't go higher, and I am not even really bearish. I just think this is one of those times that nothing said "buy" on Friday afternoon other than a random gut feel for someone. The technicals were not screaming for people to get into the market at that point. Sometimes this happens where all of the technicals point one way and the market does the opposite. It's been happening a lot more since 2008 actually.