Hibachi Grill Market

MARKET WRAP UP 06/17/10

On the back of yesterday’s consolidation, the market yet again put in a boring, choppy day. With the S&P 500 staging a last minute mini-burst to close up 0.13% to 1116, this market is quickly becoming fodder for an hibachi chef. Traders trying to play intraday trends are being sliced and diced like tender chicken, noodles and onions on the grill.

After the run up that we have seen since we printed 1042 a mere nine days ago, a quiet period of consolidation is a solid check in the bulls’ win column. This type of price action is far more constructive for the bulls in terms of tightening up extended daily charts, and building sound bases. What the bears were hoping to see was a quick reversal on heavy volume, giving back the previous nine days’ gains, presumably taking us to new lows. Instead, the current benign toggle between bulls and bears is helping to offer very good long setups, should we see a few more days of this type of action.

Anecdotally, I am seeing a high level of apathy and disinterest amongst traders, which is often found after the kind of fast, emotional selling that we saw in May and early June. Usually, apathy is the last stage of sentiment during a correction before we turn back up. Of course, prognostications aside, the price action on the updated an annotated daily chart of the S&P 500 tells the story of a healthy flattening out just above the 200 day moving average (see below).

Looking ahead, the bulls can afford to see a bit of a pullback from here, so long as it is not on heavy volume. A light volume dip to 1085-1100 would likely invite some aggressive bulls to load up on longs. The bears, on the other hand, need to start asserting themselves quickly, as the longer that we come to terms above the resistance trend line (see my chart above) as well as the 200 day moving average, the more likely it is that our next move will be much higher from here.

Regarding my portfolio, my top three performers today were: $APKT, $CRM as well as $IAG again. All three of those charts continue to look bullish. As for $LULU, I noted last night that I expected a pullback in that extended name, and indeed we saw that today. I am content to hold my 1/2 position, as the daily chart of that high momentum name presumably takes a healthy breather.

With a cash position of 67% and some small hedges in $TLT and $TZA, I am well positioned to take advantage of any more consolidation and/or healthy pullbacks. Note also that my current allocation limits my downside, should the bears regain the initiative. Seeing as we remain below a downsloping 50 day moving average, a cautious approach is still preferred. While the character of this market appears to be changing in favor of the bulls, the bears have by no means been left for dead yet.

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