Tuesday, June 12, 2012

not much has changed ...

Since my last post ... not much has changed in the market.  We closed at the same level on 5/22/2012, 5/24, 5/25, 5/30, 6/6 as today.  We clearly are in a trading range, where the market can't seem to make up its' might as to which way it wants to go.

Price wise today at the very end we had a very strong up move implying higher prices were to come in the next few days, but I think volume (based on preliminary data) still is still showing that the big boys are not participating in this rally attempt.  Certainly the spy, qqq and dj-30 had lower volume than yesterday, too early to see nasd, nyse and spx volume.

I took a very fast look at about 100 charts of companies that lead the market up from December through March and it was quite interesting … almost all of the ones that had an up day today did so on lower volume, and almost all of the stocks that had a down day were on greater volume … not what we want to see in a bullish trend.

I clearly see the market acting better over the last number of days as it seems to be stabilizing, but at this point … this seems more of a bounce to me than a rally.  Now … it wouldn’t surprise me if we continue higher and get slightly over the 50 day moving average, but so far I’m not very convinced on this one from a longer term trend perspective.  I just don’t have a lot of faith in a potential rally at this point.

With that said, I also don’t see any conviction to further downside either, although it would also not surprise me if we go down to test the low one more time and then rise up with more strength.  In fact ... this is my preferred direction as I think this would result in a much stronger rally later this year.

In the last 15 days we have had 3 accumulation days and 2 distribution days, whereas in the last 20 days we had 3 accum days and 6 distribution days.  So things seem to be getting less negative.

If I could manipulate the market (if only …), I would say the market is looking better day by day, but that it needs much more time (sideways movement) to heal if we are going to get a solid rally attempt and get people wanting to invest. 

Yesterday was a big slap in the face to the bulls, but today was a strong recovery attempt … even though it could not get over the 20 day moving average (on the nasdaq) and only recovered roughly ½ of yesterday’s price decline.  Even if volume on the NASD was higher (or roughly the same) than yesterday, that would mean that it took more volume to move the market ½ as much … hmmm … that tells me that the big boys are not buying ... but rather the opposite.

Clearly for now we are stuck in a trading range with a big battle occurring.  Price wise it seems the bulls are winning, volume wise it seems the bears are winning.  This tells me that that big boys are sitting this one out and that the small value investors are pushing this market up.  This is not a recipe for a long term uptrend, but the landscape seems to be improving daily and therefore the outlook could change any day in either direction.

Stay safe and cautious for the time being.

Thursday, June 7, 2012

bulls need to be more convincing if they want this

Today's price action left a foul taste in my mouth.  We opened with a large gap up (roughly 1% up), and spent most of the day falling to close flat (Nasdaq was down 0.50%).  Volume was restrained, so it was nice to see there wasnt a mad rush for the exits as prices fell.

Today could just be a resting day where the market needs to consolidate yesterday's gains, but it pushed me closer to the bearish side and in fact, I started looking for short setups although I am not going live with any trades yet. 

The bulls need to send a very convincing signal to the market that they are in charge if they want this market to go up and they need to do it quickly.  Until that occurs, I choose not to partake as it is a sucker's bet.

For now I sit on the sidelines and wait for direction one way or the other.  My guess is that I will be in the market one side or the other tomorrow (or Monday) as I assume one side will take control very quickly.

Wednesday, June 6, 2012

well ...maybe ... walk for the hills instead??

Today was a stellar day in the market price wise.  All the indexes closed up over 2% on news that Europe is going to finally start taking their financial situation seriously.  Banks leds the race up.  It is a GREAT example that news can change the perception of all players at a moment's notice and that you have to be nimble.  People that were sitting out because of their fear, once that fear was removed ... they have no reason to sit on the sidelines.

With that said, I'm not calling my suggestion yesterday outlandish just yet.  One day does not make a trend, and the volume today although better is still much lower than the down days over the past few weeks signifying that there is not full support by all parties quite yet.

News driven bounces many times can fizzle, and given that most participants were short going in to today ... we could have had nothing more than a short squeeze.  Although short squeeze's certainly create a fast positive move, once all the shorts are out, there needs to be people buying on the long side in order to keep the momentum alive.  If there isn't, we will stall and eventually continue downward.

I am still sitting on the sidelines currently.  Although today's movement was widespread by most stocks, I need a little more reassurance than one day.  If we get a strong follow through day tomorrow OR over the next few days (with accompanying volume), I will be back in the market.  Of course, I don't treat my entrance into the market as an all or nothing event ... I will be wading in with smaller positions until I clearly see what we have in store. 

This very possibly could be a bounce and not a true rally, but the bounce could EASILY go up 4 - 8% (up to the 50 day moving average for sure) before showing signs of weakness again.  We have a lot of resistance to get through and until that is completed, we watch and possibly partake with some skepticism.

I leave you with a reminder that just a few weeks ago, we hit a short term bottom and had a very strong one day bounce (5/21/2012) which resulted in a 2.4% gain for the day in the Nasdaq.  After that we slowly broke apart  and dropped another 3%.  Don't get too excited for today just yet, I certainly like today's action, but we need to continue with the same strength over the coming days and weeks in order to convince the big money to start moving back in.

Tuesday, June 5, 2012

run for the hills

As much as I hate to say it ... the last two days of an 'attempted rally' has shown me that we are in for more downside and probably starting tomorrow.  It is VERY clear looking at the volume signatures in the market that the institutional investors are not interested in buying.  You really don't have to look very hard to see the incredible weakness in this rally attempt.  Some value hunters are out, but without the fuel of the big dogs ... it will be very short lived.  Now with that said ... maybe the institutions will come out over the next few days, but clearly they have no interest in playing in this market at the moment.

I'm very comfortable sitting in cash and waiting this one out.  I would be shocked if we don't have more downside coming and soon unfortunately.

stay safe!