Monday, February 14, 2011

State of the Stock Market - 2/15/10 - "Looking for a Pullback"

Another up session today on Wall Street - both the S&P and Nasdaq were up a small amount in choppy overall trade.   This makes it 9 out of the last 11 sessions for both indices, with the two negative sessions coming in at losses of 0.27% and 0.28% for the S&P and 0.06% and 0.29% for the Nasdaq.   Volume looks like it will come in a good bit lower today.

I'll try to keep this short since it's Valentines Day.  This weekend, I discussed several of the issues I am seeing in this current market and why I am expecting a pullback soon.   My guess is that this pullback will be sharp, quick, and surprise many.   I don't think it will necessarily end this bull market - I just think it is wise to protect what you have if you're a short-term trader. 

We are extended in a number of ways and there are divergences between this most recent run and the runs we saw from September to November and December to January.  I discussed these in the video.  Volume was extremely weak.   None of this matters I guess until it does matter.   I do believe, however, it makes sense to pay attention to these signals.   I would continue to remain focused on short-term trades and lighter positions than normal.

I was stopped out of one of my positions today (RP at $28.29) for a small loss.  I entered this on Friday at $28.53.   When it gapped up today I moved my stop up, but to be honest, based on the intraday action, I think my stop and some others were run.   Oh well - it happens.  I have tightened my stops on my other three positions and will keep those in place.   Again, I don't think this is the time to give your positions a whole lot of room to go against you, but that's just my opinion.

There are still stocks that are working out there but it seems like they are becoming fewer and farther between as we go higher.   Basically, at this juncture, I just don't see much that is worth entering on the long side so I think caution is warranted.   I'm not saying to short or anything like that - I am just saying to be careful.  You don't want to be caught in a nasty one or two day selloff, especially if you enter late.   Perhaps (hopefully) the market can just consolidate for a week or two on slower trade to setup more nice chart patterns, but given what I see, I don't sense that will happen.  Good luck Tuesday.


Dr Van Nostrand said...

Interesting point about stops getting run on I actually sometimes break up my stops especially in thinner issues where I seem to get wiggled out more frequently.

I think this market might go parabolic soon, nobody seems to consider that as an option which makes me think its likely that all these sentiment indicators and oscilators gets streched even more before we implode (or at least pull back) For those CANSLIM types the leaders have not broken down NFLX BIDU PCLN AMZN usually those crack before the market. Keep up the good work Mac you got a great site here.

Mac said...

I was thinking about that option - a blow-off top soon. I just don't know if that happens without major volume. Certainly a possibility however.

The leaders you mentioned are very extended which is one reason I am expecting a sharp, one or two day pullback. If they hold up well and just move sideways to slightly lower, then all is well.

Anonymous said...

volume - Valentine's day - Hedge Fund guys left early (or took weekend off) to spend bonus $$$ on loved ones?

nice breakout of BZ - good call