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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%
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