Sunday, January 27, 2013

Stock Market Outlook for Week Ahead - Questioning Things But Not Fighting It

Good evening traders.  We're looking at a market where the S&P has now closed positive for eight straight sessions.  The Dow has closed positive for eleven out of the past twelve sessions.  A pullback certainly looks like it should be in the cards, but who knows?  This market just keeps chugging along, although I continue to believe that the market is not quite as strong underneath the surface as it might appear. 

My view is likely skewed because I have had an awful start to the year and just can't seem to catch a break, let alone get a winning streak going. I have been heavily long almost every day this year and just can't catch any winners.  I've caught a lot of whipsaws and a lot of stocks that breakout but then give it all back (CLSN, THLD, ARNA, CBEY, OREX, NSM, DGI, HMST, PAG, BLOX, BRLI, RFP, ACCL for example).  Some of it has been bad luck, at least I hope so.  For instance, I went into SWI early on Friday as the chart was showing heavy volume early on in the session.   As I put the stop order into my phone, I guess I accidentally put it as a limit or market order and it was immediately sold.   Then it moved almost 4% higher from there.   That's how my luck has gone so far in 2013.  

I think what has made this market "weird" from my perspective is that we have yet to have any really big, powerful session except for the gap-up to start the year.  For instance, the 4% breakout/breakdown ratio I follow and use (from Pradeep over at Stockbee) has been positive for eighteen straight sessions now.  I can only find a stretch in my data that has a max of sixteen positive days in a row, so we are in uncharted waters in this regard.  The weird part of this streak is that if you remove the opening session of the year, we have yet to have one +200 day.   Not one.  That's odd but perhaps it explains why I see a lot of individual stocks not acting as strong as they should and why on days where the Nasdaq is up twenty, I see half or more of my watchlist trading down on my quote screen.   Advance/Decline numbers have been rather weird many times this year as well.

No Really "Powerful" Sessions Yet

One other observation I have made over the past few weeks as I try to understand why my particular trades aren't working in a market as "bullish" as this one is that I have not noticed many of the traders I follow on Twitter talking about big, winning trades.  I have heard lots of talk about how the market is very bullish, but I haven't seen a lot of specific names being mentioned or put forward as big winners from this early period of the year.  By big winners, I am talking about positions that would give 8% gains or higher.  That is rare as human nature leads people to share successes, but maybe it's just me. 

Here are some more potential setups for the week ahead, but as I have stated before, be aware that the markets are in a position where a sharp pullback can come at any time and really hurt those who are late to the party.  Ideally, we would see a few days of sideways action here but that rarely happens anymore.  As setups trigger, I am going to keep giving it the "old college try" and entering them, hoping that the strategies I have used and been successful with in the past start working better than they have this year for me, but we'll have to see.  I continue to sense that something is just not right with this market rally - that is it not quite as impressive under the surface as most would have you believe - but I am not trying to fight it.  My overall market score remains bullish and I am staying long until that changes.  I'm just hoping I get some good luck for once this year.  Speaking of which, good luck in the week ahead. 
Charts from TC2000, Courtesy of Worden Brothers, Inc.

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