Wednesday, February 2, 2011

State of the Stock Market - 2/2/10 - "Boring, But Not Bad"

We saw a whole lot of nothing today on Wall Street, as stocks took a breather from their frenetic, up and down action of the past two weeks.   The S&P traded in about a five point range all day while the Nasdaq traded in a ten point range, with both ending up with very, very slight losses for the session.   Volume appears lighter as well.  Perhaps traders are waiting for tomorrow's employment report and wanted to keep things light before it.

Very little changed today from a technical perspective with this market - the Nasdaq is still below key resistance around 2763 while the S&P is still near new highs for the year.   Today was positive in that no major selling came in and that is a good sign.  Back in April of 2010, both sharp bounces up during that top were met with immediate selling that eventually led to the deep correction.  We didn't see that today.  A few days of rest up here would give the market a much better shot at busting out and starting another significant leg up.  Obviously another sharp move lower would lead to me think a top is in place, but I can't predict if we'll see that or not.

My two secondary signals turned neutral today and while my main one remains on a sell, I would describe myself as very much neutral here.   I remain in cash and am willing to do whatever the market tells me to do - take some shorts or enter some longs.  I have no preference.  

There were some movers in the rare earth group today - names like SHZ, REE (which I was stopped out of last week), and XING - but volume was only slightly higher.   I saw a few other names (STEC, CBPO) that somewhat interest me, although volume in both was only slightly higher.  ARX had a nice IPO breakout today but again, volume was not very impressive given the move.  Overall, I continue to see a lack of tremendous setups and that is one big reason I am neutral.   If I see more setups, I would feel much better about the potential of this market going forward.  

 Charts from Telechart, Courtesy of Worden Brothers, Inc.

Good luck tomorrow - I would like to make some moves at some point this week but I don't like forcing things and that's still what I feel I would be doing here.   Maybe Friday's action will be some clarity.   Take care.

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