Tuesday, January 8, 2013

So Far, A "Perfect" Pullback...Hopefully Not Too "Perfect"

After the great action from the first week of 2013, I along with many others was hoping for a nice, calm pullback that would allow the market to digest those big gains and also allow more individual setups to develop.   When I took a look at the charts of the indexes after today's session, I really couldn't ask for anything more. 

 S&P 500
Russell 2000

The pullbacks on the three indexes above have come on lower volume than the big up volume we saw on the gap up last Wednesday.  The pullbacks have been very calm in nature with very little given back price-wise.  The nine day exponential moving average (a very important short-term level that I watch religiously) has now been allowed to catch up to price and did act as support today.   We're now looking at nice (albeit a bit short) bull flags being formed across the board.  Based on these charts, the market certainly looks like it wants to go higher.   

The only thing I worry about right now is that whenever something looks "perfect" on Wall Street, a wrench is usually thrown into the picture soon after.  I hope we don't see that but it wouldn't surprise me.  Perhaps a sharp move lower that that nine day EMA would get some people (like me) a little flustered and work as a shake-out.   Maybe a surprise gap-down would do it.  I am not saying it will happen, but don't be shocked if we see something like that.   I hope we can avoid it and the market just moves up out of these bull flags smoothly, but we'll see.  If a smooth move up takes place from here without any shenanigans or shake-outs, I think it will speak well of the potential upside present in 2013.  

Some setups for Wednesday and the rest of the week are below.   I am still holding some longs but I haven't had much luck getting any big winners so far this year.   It seems like the ones I pass on are the ones that are moving.   ARNA was the example from today - had it on my list but since I tried it several times in late 2012 and never got anywhere, I passed.  I also got stopped out of SNTA early in the session as I moved my stop level to breakeven, only to see it climb all the way back and close at its highs.   That was frustrating.   Trading is just that from time to time. 

Charts from TC2000, Courtesy of Worden Brothers, Inc.

Good luck Wednesday.   Maybe this "perfect" pullback will lead to a "perfect" move higher.

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