Thursday, March 31, 2011

State of the Stock Market - 3/31/11 - "Very Cautious Entering a New Quarter"

I discussed yesterday how a big clue for me whether this market wants to rally for a longer period of time is the behavior of the breakouts we saw yesterday.   Here's how they look.

Charts from Telechart, Courtesy of Worden Brothers, Inc.

Overall, they don't look too bad, although it's my luck that I entered the two that look the worst.  I did sell two more positions today (REE flat and MOTR for a 1.97% loss) because I really don't want to be heavily long going into the jobs number tomorrow along with the start of a new month (and perhaps an end to the end of quarter window dressing).   Both the Russell and Nasdaq have now been up 9 out of the last 11 sessions and we have had a streak of now 11 sessions with positive breadth.  Typically when that number gets up around 10-12, we see a shakeout with individual stocks getting hit harder than the overall indices.   It doesn't have to happen, but I am kind of expecting one.

I maintain a bullish outlook overall until the market tells me different, and continue to hold my two long positions started yesterday.  However, I went into today's session with a lengthy watchlist and expected to put some money to work, but I wasn't that impressed with the intraday action of those stocks on my watchlist.  Basically, I just don't see much reward for starting new long positions here and will wait to do so.  Be careful right now.  A pullback into the 2745 area for the Nasdaq and 1310 area for the S&P is where I would look to reload, and if we get that over the course of three or four days, it would likely set up some VERY nice charts.   We'll see if we're that lucky.   Good luck Friday.

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