Friday, February 25, 2011

State of the Stock Market - 2/25/11 - "Less Impressive Than It Seems"

Interesting day on Wall Street today - we saw a nice bounce which I think many traders (myself included) were sort of expecting.   At the same time, the bounce came on what looks like MASSIVELY low volume (at least on the S&P) and a quick look at my scans shows individual stocks all over the map, which is kind of weird to see on a day where both the Nasdaq and S&P were up over 1%.   I am really not sure what to make of the action in terms of the overall market other than to say I think it could be at least a week or two before we get near the highs of last week or the lows of this week.   I am still guessing we are going to chop for a while here while the market makes up its mind about where it wants to go from here.

Going into the day, I was long three stocks (CROX, BW, and HOGS) and still had my position in QID.   I ended up closing that quickly at $10.37 (split-adjusted) for a 0.45% gain.  You would figure being long on a day like today would be good, but HOGS was the only stock that I can say acted "well" today and even that wasn't very explosive.  

BW was an earnings play I entered yesterday at $38.75.  It had some immediate follow-through to yesterday's earnings gap, but soon sold off and finished the day flat.  CROX gapped up and then immediately sold off.   I saw other earnings plays do the same thing today - CRM and DECK are two examples that stand out.   I posted both CROX and BOOM last night on Twitter as possible setups - I ended up picking the wrong one, being stopped out of CROX at $18.38 for a gain of 0.25%.   Hopefully someone was able to get into BOOM and didn't pass like I did.

I will discuss this more over the weekend, but I do think that there will be more to this pullback over the next few weeks that what we saw Tuesday and Wednesday.   Take a look at this list of names - CRM, LVS, BIDU, VMW, AAPL, CMG, LULU, GOOG, AMZN, NFLX, DECK - all bigger cap stocks with strong earnings.   Do these look like charts that are going to take this market right back to new highs?   Most look like short setups to me. 

Right now, this market is very difficult to trade from an intermediate-term perspective so keeping positions light and cash heavy is smart.  I have two longs but both are small and I do have most of my account in cash, ready to prowl when better setups (perhaps on the short side) present themselves.  Enjoy the weekend.

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