Sunday, September 30, 2012

Tough Market to Call Here

Like my title states, I think we're in a market that is tough to call going forward.   Ever since the market broke impressively to new highs on September 13 on the QE3 news, the market has acted weird.   We saw a perfect consolidation period for the week following the QE3 news, but on September 21 (options expiration), the market gapped up and sold off from the open that day and has been very weak since then.   The market put in two distribution days last week on both the Nasdaq and S&P and got rejected by the nine day exponential moving average on both of those indices on Thursday and Friday.   In no way was anything we saw last week what I would call "bullish", especially considering Thursday's bounce was immediately sold the next session. 

 S&P 500

My breadth signal turned back to a "sell" on Friday and certainly the price action is worrisome here.   On the flip side, I see some very smart traders on my Twitter stream whose opinion I respect remaining bullish going forward due to the QE3 effects as well as the Presidential election.  Do you really think this administration will let the market start falling off as we head into what could potentially be the final few months of their reign?   I also still am seeing a good amount of nice charts and there was not the damage that I would expect to see on individual names given the distribution we saw last week.  My overall watchlist has certainly narrowed, but not to a level that suggests we are entering a big correction period. 

These conflicting signals is what makes this market hard to call in my opinion at this juncture.   I am actually long three positions here but the stops are pretty tight and I would put my overall outlook as "neutral".   If the Nasdaq and S&P can clear their Thursday highs, I would then feel much better about the strength of the bulls going forward.   On the other hand, if Wednesday's lows are broken, then the possibility of an intermediate-term top being put in last week is very strong.   That's how I am looking at things going forward and until one of those levels is broken, I see myself remaining "neutral".

Here's some charts that I will be watching early this week and will be interested in if the bulls can finally get going.   My current positions are included as well.

All Charts from TC2000, Courtesy of Worden Brothers.

Others that may work next week are MDAS, RPRX, GILD, SMBL, and GIII.   Let's see what the bulls can do.   If the market breaks down, I will quickly be in cash and sitting on my hands while things work themselves out.    Good luck next week.

Performance update - My main account was up 13.3% in the third quarter, putting me up 25.9% for the year so far.   I was hoping to be up around 50% at least for the year, but that may be too ambitious a goal as of now.   If we can get a big rally going into the end of the year, however, it is possible so I will do my best to hit that.   All of my trades (good and bad) are listed here.

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