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MARKET WRAP UP 08/17/10
During my wrap up last evening, I discussed the prevailing emotion in traders as being one of disinterest and/or frustration with the current market. After last Wednesday’s swoon, we experienced three doji days of amorphouse price action. Just as many traders were doubting the ability of the bulls to rally (and the bears to take us lower), citing excuses such as, “things just do not feel right to me,” and “this market is broken and cannot rally,” I noted that a more objective look at the daily charts of the leading indices and sectors pointed to key support levels holding. With paralyzing emotion often signaling some type of a bottom, the S&P 500 rallied 1.22% to close at 1092. Breadth was strong, while volume continued to reflect light summer trading.
As the updated and annotated daily chart of the S&P 500 illustrates below, we have held support exactly where the bulls needed to. The fact that we held above the late July lows is a good sign that the multi-month inverted head and shoulders bottoming pattern may be more legitimate than the head and shoulders topping pattern. Either way, a short term higher low was made. The bulls have now regained the short tern initiative after the past three days of indecision. However, as evidenced by some selling we saw into the closing bell today, this rally will be a true test of mettle for the bulls. In the face of profit-taking, they must provide an underlying bid to the market.
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Despite their victory today, the bulls have a good deal of overhead supply to contend with in the coming days, should they attempt a winning streak. Similarly, the technology bulls also held support on the Nasdaq Composite Index, and I had been noting during the past few days that it was imperative for them to do so.
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Updating some other key sectors and indices, the prevailing theme is that of the bulls holding support exactly where they needed to.
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Looking ahead, the bulls are likely to push us higher in the coming days. However, I would be surprised if we see more moves like we did today. I am looking for more of a grind higher during the rest of this week. Depending on how charts begin to take shape, combined with the signals of The PPT, I may start to scale out of some longs. For now, though, I will give the bulls a chance to take my holdings higher.
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TOTAL PORTFOLIO:
EQUITIES: 58%
- LONG: 58% ($NOG $LVS $MELI $LCAPA $BZ $HMIN $ISLN $RDWR $CMI)
OTHER INSTRUMENTS: 8%
- $TBT
CASH: 34%
thanks so much…I’ve learned to sell losers, but letting winners run is still tough, and your postsare so helpful!
thanks for the perspective Chess
From what I can put together from reading various opinions and talking to the few real traders I know, most feel if this thing really turns down it will go down fast. Very low short interest will make drops lack bids. I think many just do not want to get caught running for the door, which probably means the low volume move up will commence. Just my two cents.
Well said CNW..
nice insight, chess!