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MARKET WRAP UP 11/23/10

We had another morning of blood on Wall Street today, as extremely negative headlines provided a bearish setting. Unlike yesterday, though, the bulls failed to pull off a late-day rally. Instead, although not at the lows, the S&P 500 closed down 1.43% to 1180. Once again, there were some impressive individual performers beneath the surface, namely in the retail/consumer discretionary space. While overall market breadth was poor, volume was meek.

Heading into Wednesday, the busiest day of the entire year for traveling, I would expect to see an overall drifting sensation in the markets. Then again, the SEC, as well as Ireland and North Korea, do not seem particularly keen on adopting the holiday spirit.

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MARKET WRAP UP 11/22/10

Despite many looking for the traditional bullish bias to the markets beginning this time of year, stocks wasted no time in plunging this morning, hitting an intraday low of 1184 on the S&P 500. However, just as traders were about to trade in their pumpkin pie for that of the humble variety, the leaders in the Nasdaq Composite engineered a late-day rally, as the S&P finished down 0.16% to 1197. Despite unimpressive statistics on the broad indices, the high momentum market leaders acted well.

Nonetheless, the S&P is still coming to terms with the 20 day moving average. As this holiday week progresses, it is logical to think that volumes will shrink drastically across the board. With that kind of backdrop, I find i difficult to see how bears would feel compelled to press their shorts here. Then again, not being forced to redraw a map of the world to cross out Ireland is always a nice little bonus.

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MARKET WRAP UP 11/18/10

As the GM IPO launched, stocks held on for the large majority of their gains after a morning gap higher today. Breadth was strong, as the risk trade was clearly back on the table, with the S&P 500 finishing up 1.54% to 1196. In the past several weeks, one of the more fascinating psychological aspects about the market has been how quickly traders have shifted from a fear of missing out on the rally higher, to suddenly having fear of being caught in a sell-off. Today, we seemed to have come full circle, with market players scrambling to accumulate long inventory.

The pressing issue is whether Tuesday’s print of 1173 on the S&P marked an intermediate-term bottom. Clearly, after today’s price action, the bulls have regained the initiative and must show some follow-through. We closed just below the rising 20 day moving average on the S&P, and how we negotiate that reference point will be a key tell in the coming days.

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MARKET WRAP UP 11/17/10

In front of an historically large General Motors IPO pricing this evening ($33/share), stocks put in a rather dull session, as the S&P 500 finished slightly up 0.02% to 1178. While there were some isolated pockets of strength, the lack of a sustained bounce after the past several days of selling made it difficult to make aggressive buys. Looking ahead, the rising 50 day moving average on the S&P, currently at 1167, appears to be acting as a price magnet.

We also remain short-term oversold. While it is most certainly correct that oversold conditions in the market can often persist much longer than one thinks possible, it is also true that during bull runs the market becomes oversold rather quickly before seeing aggressive bulls come in to buy the dip. Thus, the pressing issue going forward is gauging just how much conviction those buyers truly have.

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MARKET WRAP UP 11/16/10

Across the leading indices and sectors today, many a 20 day moving average fell early on in the session, as the S&P 500 finished down 1.62% to 1178. Breadth was strikingly bearish, and any intraday bounces were quickly met with heavy supply. While this development sparked a fair amount of hype amongst emotional traders, not to mention the financial news media getting in on the act of declaring the recent rally over, days like today are constructive for swing traders seeking to ride the prevailing trend.

With a rising 50 day moving average on the S&P chart, that general area looks to be the next key support level. After the recent leg higher from 1150 up to 1227, a sharp 4-6% correction should not come as a surprise. In fact, the argument can be made that it should be welcomed as a sound buying opportunity. It is also interesting to note how quickly the market is becoming oversold (e.g. the McClellan Oscillator), which is the hallmark of a mere shakeout within the context of a bull run.

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MARKET WRAP UP 11/15/10

Stocks were mostly in the green today before finishing flat, but the overall performance was far from inspiring. Several names normally associated with momentum (e.g., IMAX, VECO) that ended the day higher failed to achieve so much as their average daily volume, highlighting the lack of heart shown by the bulls in reacting to last week’s precise test of the rising 20 day moving average on the S&P 500. If nothing else, today proved to be an excellent opportunity to sit back, relax, and let the dust settle before Mr. Market decides in which direction he would like to proceed. Although it is true that only price pays, when buying names at alleged levels of support it is crucial to be cognizant of the volume on individual issues in order to gauge conviction. Otherwise, how can we best define our risk in surmising whether or not support will hold?

To be sure, the bulls still hold the advantage, with price above the rising 20 and 50 day moving averages on the S&P at 1197. With that said, this is no time for buyers to become complacent.

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