Monday, April 18, 2011

State of the Stock Market - 4/18/11 - "Tough"

It looks like we have ourselves a real mess of a market right now.   Today was a bearish and bullish day (depending on how you want to look at it) and your guess is really as good as mine where we head tomorrow.   The day started with a major gap down below key support and the selling continued for most of the morning.   Around 11:00 however, things stabilized and stocks bounced back with the Nasdaq recovering about half of their overall losses.   The action puts a bullish tail on the Nasdaq and other sector ETFs, but overall most indices remain below their 50 day moving averages and the lows from last week.   Again, your guess is as good as mine right now. 

To show you how messed up today was, all you have to do is look at my account.   I entered the day with three longs and two short positions.   I am down to one long position as both shorts were stopped out on the bounce and both longs were stopped early in the session.  Maybe that just says something about my stop management, but I would like to think instead that it shows this market was all over the place and hard to read today.

As I look at the watchlists I showed today, I see a lot of stocks that really didn't do much in the grand scheme of things.   SPRD was a winner on the long side (and I did tweet about that one midday) but that was it.   OCZ and GLNG were really the only long candidates that had major breakdowns today.   Again, kind of weird when you think about the magnitude of the move early today.   From the short watchlist, there were a few that did move lower like TDSC and SGI, but there was also LVS, which triggered early and then did nothing but whipsaw shorts late.   Not fun.

Overall, I think I am going to go into "less is more" mode here and take things slowly.   My main signal is bearish, one of my secondary signals is bearish, but I also think this could have been a type of "shakeout" move today, especially when I look at bigger cap tech stocks like AKAM, OPEN, VMW, and even AAPL.   With earnings season upon us, I am going to focus on those plays mainly and go from there.   Tread lightly and keep an open mind - today was crazy and hopefully the rest of the week will be a bit easier to trade.  Take care.


Chart Analysis said...

Tough action indeed. While I can see the bulls taking the reigns once again, here's my bearish argument.

-50 MAs are getting taken out.
-Volatility increase is usually a bearish sign

My feeling is that this late strength we saw is more of a bull trap and could really lead the way to some selling. This was a stand by the bulls where they're trying to put in a bottom, so if this area fails to hold, then I see things getting bloody in a hurry. There are still enough bulls around to put up a fight like we saw today, but just wait til this wave get's taken to the cleaners, then you should see the fear factor spike back up.

Cautiously bearish at this point, but the bulls certainly still have a fighting chance here.

richb said...

Chart Swing Trader,
Thanks for your honest posting today. I also was stopped out of my two short positions in the morning. By mid-day, I noted so many conflicts on my charts, that I did not try to take any trades long or short in the afternoon; and decided to just watch the action into the close.

I suspect the almost daily QE2 multi-billion dollar treasury purchases may be affecting the market behavior over-riding expected chart patterns and price movement.

I look forward to your market comments everyday and appreciate your input. Thanks again for this open and honest read on the market.

Anonymous said...

hi mac

dow will not stay abov 12400 over 1 week, i mentioned 2 weeks ago. the next supports of dow are pretty close, 12165 and then 12100. we did a fake breakout in early morning.

dow is bearish & sell signals are on; so dont long the "indu" constituents. however, other stocks are on happy days. same as here in hongkong where the hangseng index keeps falling, other tier 2 or 3 stocks (non HSI constituents) go up almost day by day.

short the index, long the other stocks, my tactic.