Monday, March 14, 2011

State of the Stock Market - 3/14/11 - "Waiting Mode"

We saw basically the opposite of what we saw Friday today on Wall Street, as stocks were down but not by that much and volume wasn't very heavy.   The action was bullish in that stocks did break (on the S&P) or test (on the Nasdaq) their February lows and did finish off of them.   For the market to not fall off of a cliff here given all that has happened in the world over the past week is a good sign.  That being said, I don't see any signals that it is the time to get aggressively long either.  This dip (unlike others) wasn't aggressively bought (at least not yet) and that is very important.  Caution remains warranted.

Technically, I discussed my outlook in the weekend video and nothing really changed today.   I am still in my SDS and QID positions and will let those go until the market gets above its 50 day moving average.   The 2750 number is becoming a key level to watch on the Nasdaq as there are several areas of resistance there and a move above it would certainly be meaningful.  If we see that move, I will readjust my outlook, sell my two inverse positions, and once again look for longs.   Until it happens, however, I continue to believe last Thursday was an important session and it is going to be harder for stocks to just bounce right back like they have so many times before.   We shall see.

Nasdaq

Charts as a whole remain mixed.   Two sectors I would worry about based on their charts are semis and basic materials.   Both continue to look bearish and the setups at this juncture do not look good for the overall market (particularly the Nasdaq in the case of SMH).  These areas need to show some strength and quickly in order for the bulls to take back control of the overall market. 

Semis
Basic Materials
All Charts from Telechart, Courtesy of Worden Brothers, Inc.


Basically, we're kind of in "waiting mode".  We haven't seen much if any negative follow-through to Thursday's gap down, but with so much resistance above, it's hard to get very bullish about the current market.  Cash remains a good option here, and if you want to short, I would stick to ETFs instead of individual stocks.   Watch the key levels shown about and let the market tell you what it wants you to do.   Good luck Tuesday.


1 comment:

Jake Perius said...

I completely agree with the idea of staying at cash until the market chooses a direction. I am also happy to see the market has responded relatively well to all of the misfortunes and fighting around the world. Although that is definitely a bullish sign, it's way to much of a risk to take any positions right now (that is unless you are buying some uranium stocks while they are a value!).