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MARKET WRAP UP 09/27/10
The bulls continue to need more than one shot to knock out the bears with a break above the important 1150 price level on the S&P 500. After Friday’s compelling rally, the market gave back some of the gains in a rather dull session today, as the S&P closed down 0.57% to 1142. Continuing with the broken record theme on volume, it was light once again. Breadth was slightly negative, but we saw plenty of individual strength.
As boring as today was, and as negative as the selling we saw in the final hour felt, the daily charts of the leading indices and sectors, seen below, indicate that no technical damage was done. In fact, the red candles printed today did not even pierce below the midpoint of the big green marubozu candles printed on Friday. Technically speaking, that fact indicates a lack of potency on the part of the bears, despite how extended some individual charts are.
Going forward, my strategy is to resist the urge to call a top to this market. If, indeed, we are in the early stages of a sustained uptrend, then days like today will prove to have been healthy consolidation days where swing traders should have been accumulating longs. Another aspect of uptrends is that the pullbacks are often characterized by much more sizzle than steak. The selling into today’s closing bell seemed an awful lot like we saw on Thursday. The tendency was to quickly call for a reversal in the market and press shorts. However, we know from Friday’s action that the bears were aggressively squeezed when they thought they had recaptured the initiative, and thus the uptrend continues.
An alternative scenario is that 1150 is too tough of a level to breach to the upside right now. If Robert Prechter’s Dow 1,000 forecast comes to fruition over the next several years, then I would imagine that 2010 is the year that we are ultimately rejected from the 1150 level on the S&P. Of course, a hedge fund manager like David Tepper thinks that The Fed will never let that collapse happen. With all of these forecasts and prognostications, it is easy to get lost in the noise.
Instead of making broad, blanket statements, a better approach is to focus on the price action, drown out the noise, and ride the momentum that the market has seen this month without automatically assuming that a fresh bull leg has commenced. To do this requires a day in, day out work ethic, analyzing a constantly changing, dynamic market. I recognize that the latter method requires more time, effort and daily homework.
Then again, that is what I am here for.
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TOTAL PORTFOLIO:
EQUITIES: 66%
- LONG: 58% ($ATPG $CSTR $GNK $HMIN $NANO $PAY $TIE $VMW)
- SHORT: 8% ($QID)
CASH: 34%
Best blog on this website. Hands down – thanks for your diligence.
Thanks, Long Dick.
ROFLMAO
You just keep getting better — wow. So glad you chose teaching and trading over a law career (though what do I know-maybe you’re writing for LegalZoom while we’re eating sandwiches) You are really gifted at this and you can tell that you really enjoy it. I continue to learn from you and the ibc crew all the time.
So, here is another thank you friend. (This 1150 teaching has been so valuable)
Thank you, sweetheart. Glad to see you back.
The last time we had a negative .5% day it was eruption time the next day, and it is turnaround Tuesday as well.
Could very well be.
If this were video-ized it would be in the elite category of youtube stock market videos.
Haha thank you very much, indeud.
POMO Tuesday! Rally ON Dude!!
Thanks Chess great work as usual.
Thanks, Bern.
“aggressively squeezed ”
a euphemism no doubt for “blasted in the ass.”
good shit Chess.
not reading much into this analysis for predictive power, but just thinking, what your opinion Chess of the comparison between friday’s candle, and 4/14? What I mean is that the S&P of 4/14 is last friday’s candle for this exercise.
That type of price action is the only thing that jumps out to be as bearish (if it pans out the same way, that is) among the many other spurious reasons bears cite — and that is, if big bars (the momentum ones) don’t gain or keep traction, that is bearish price action.
Ha! You know what? I momentarily thought about that comparison today during the trading session.
One thing that jumps out initially is that after 04/16, it took at least 5 sessions of tired dojis to recapture all of the gains made on 04/14, whereas the 09/24 candle recaptured all of 09/20 and more in just one session. The April 2010 situation was also more of a last gasp by the bulls, as buying any dip/pause/consolidation whatsoever had been the profitable strategy for two months at that point, and they were not going to give u right away. The angle of ascent from 02/25-04/15 was simply unsustainable, and the Goldman/SEC news was the ideal excuse for heavy distribution.
This time around, the three red candles last week helped to slightly flatten out the angle of ascent in a way we did not see from late Feb. to April.
Thanks Chess. You are definitely a calm, objective voice of reason amids all the noise out there. Much appreciated.
Lovin your blog chess!! Quickly becoming a must check on daily basis for me!! Cheers big man.
Sold my VECO (no loss), so now 1/3 cash, 1/6 short via TWM, holding DSX, OC, OVTI.