Thursday, April 7, 2011

State of the Stock Market - 4/7/11 - "Churning or Consolidation - Tough Call"

We saw a crazy day on Wall Street today, with stocks trying once again to break out of this week-long range and above key resistance on both the S&P and Nasdaq but once again being unable to do so.   The first fifteen minutes of trading today was strong, but when news hit of another earthquake in Japan, stocks sold off hard.   At that point, it looked like we were looking at another failed breakout attempt and perhaps a selloff in the overall market, but the bulls did right themselves a bit.   There was a sharp bounceback, but it never challenged the earlier highs and stocks chopped their way through the rest of the session, closing smack-dab in the middle of their range for the fifth straight session (odd I think).  Volume appears lower.

The markets appear to be in a very interesting technical position here in that they continue to fail when attempting to breakout above key resistance but also fail to break down or even pullback a bit which is a positive.   Maybe this is the consolidation that we've needed and one of these attempts will be the one that takes the market higher.   In general, it seems to be a market that is confused and not sure what it wants to do.   I would imagine a break of this current five-day range would lead to a significant move in that direction.  
The highs and lows of today's session can be used as support and resistance levels from here.

The breadth streak that I've been talking about stretched to its sixteenth straight day today, which is longer than any stretch I've recorded since this rally starts in September of 2010.   Maybe it keeps going, but I continue to worry about this and still have the thought of a sharp shakeout in the back of my mind.   What's interesting to me is that throughout this entire bounce we've only had one day of real strength in terms of # of breakout - March 18.   That normally would be a signal of a weaker rally.

I made one trade today, entering SHZ this morning.   Right now, it looks good.   I also entered a QID position last night after-hours, so I am short via two positions and long via one.   At this point, I am kind of upset with myself that I did not make more money this week as there continue to be lots of movers day to day, and today was no exception.   Last night, DBLE flashed a pocket pivot and my scans picked it up.  I had it on my watchlist, but never entered early on.   It was a big mover today but without me in it.

Charts from Telechart, Courtesy of Worden Brothers, Inc.

It's hard to trade with a full-time job - any trades I make during the day are on break time and usually over my phone.   I try to do things after work and can enter after-hours, but that is by no means perfect either.  There's not a whole lot I can do about it, but it is frustrating from time to time to miss out on entries.   In some cases, however, I am not going with what I see as well and I need to work on that - I can't use "working" as an excuse for passing up good opportunities.

Keep your options open right now as the market doesn't seem to know what it wants to do yet.   There remain a number of nice long setups out there that are worth watching, and we've certainly seen many breakout moves work well this week.   I do have two short positions but I wouldn't call myself bearish - they are more like hedges for any potential downside we may have because I still think that's a possibility.   Good luck Friday.

 *** Here are the setups...

1 comment:

Anonymous said...

Is there a way you can publish that breadth thrust chart online - not just in a blog post but to be present online all the time. It is a good reference to have .. thanks,