Friday, February 18, 2011

State of the Stock Market - 2/18/11 - "Weaker, But Trend Remains Up"

We saw a rather slow options expiration today on Wall Street, as stocks started the day flat, climbed in the morning, but gave most of those gains back in the afternoon session.  A late bounce allowed the S&P and Nasdaq to finish in the middle of their range, but the action was somewhat weak overall.   Volume appears to be higher but that is likely due to the options expiration.

Technically, I have discussed many times over the past week that we are quite extended.   Last night, one momentum indicator I follow hit a level that it hasn't hit since early November.   It also hit this level in mid-October, late April, and early March.   Two of those four times it meant nothing.  The other two times it meant a sharp correction.   It's impossible to say which one it means this time, but it bears watching.

Surprisingly, I remain in four long positions today, as although I was tempted to take profits on a few and also didn't like the way some gave back their earlier gains, I held tight.  There really wasn't a reason to sell any, so I didn't.  One of my positions was an earnings play I posted on Twitter last night and I am hoping for more follow-through.  The other three are all in the same sector and just broke out yesterday, so it's not like they've been up five days in a row or something.  This may be a mistake, but it can be a mistake to get rid of positions too early before they make bigger gains.  I'll basically let my stops work for me and move them up as they (hopefully) go higher.

Certainly this run has lasted a long time and we're LONG overdue for a significant correction, but until it actually manifests itself, it may be a mistake to try and anticipate it.   As I've been saying this week, it makes sense to keep your stops on long positions tight and perhaps reduce your size on new positions, but the trend for now remains up - you have to play it.   I'll be back at some point over this three day weekend with a video.   Take care and enjoy the break.

1 comment:

JP said...

I didn't like how my positions acted at all today and decided it was time to take profits and return to cash. I'll take a fresh crack at the market next week.