The thud that resounded this afternoon was the sound of thousands of bull balls falling off and smacking the ground. Remember, the bulls were banded a couple of weeks ago.
I’m a bear and have been a bear since October. However, stocks seldom move in one direction for very long. Based on RSI(2) readings on the Nasdaq and SPY (both are at ~4.00), it seems probable that there will be several days of stabilization ahead, or even a short bounce. Today was the fourth down day in a row.
 The screens I ran tonight found many, many stocks in uptrends that have recently pulled back to support or a major moving average. The RSI(2) screen usually returns a couple of stocks a week that meet my criteria. Tonight, there were at least 7 stocks in strong uptrends but were oversold. This means there are likely many stocks at points where one would “buy the dip.”
The wildcard is that the last 10 or so trading days have been executed on lower volume and without all the participants necessary to make the market. An important observation is that the indexes began trading today at levels near where they were when many traders began taking off for the holidays. Odd, no?
Because the technicals have been skewed by lack of participation, it is difficult to make a confident call about this week. Everyone knows the S&P has been weak and the Nasdaq strong. What should concern the bulls is that the Nasdaq is sitting just above support. It is the last stronghold of the 5 year bull rally. If it cannot rally or stabilize immediately, that support will likely fail. Should this happen, we will switch from looking for a tradable bounce to instead looking at the resumption of a steeper downtrend and waiting for capitulation, as market breadth is no where near any levels where we might expect a sustainable bottom. In the near term, my feelings are that the bulls will not give up so easily and will work to defend this support, likely tomorrow.
All that being said, there are also some very real phenomena that happen in January, with traders positioning themselves for the first half of the year. With this comes selling of 2007 winners so that taxes are deferred into 2009. Also, there is no need to window dress anything, and investors will not be looking to see what there funds are holding for another 3 months.
Tomorrow’s action will be key, and with that clarity, hopefully I will be able to bring you some words of wisdom and some tradeable ideas.
with the Nasdaq, see yr chart, having now tested its lower trendline for the 3rd time, things do not look that good, so I hear. Also hear that the 3rd test usually means the trendline will get broken and then look out below. I guess we’ll know soon.
Still a lot of tech bulls out there. At least there are on CNBC. I think there is more grinding before another move down.
Tech stocks will not survive a recession.
Recessions have a devastating effect on consumer psyche.
No doubt they will not. I’m just saying that I don’t think armageddon is coming tomorrow. Maybe next week. I think there are still too many buyers of tech out there. They will be demoralized, soon. For example, look at AMZN. It is a freaking retail stock, making new highs, because people think it is tech.
Agree! Armageddon is at least a year away.
If you look at the T2108 indicator it is in the middle between oversold and overbought. The bad thing is this market has a long way to go before it is oversold again. This leads me to believe that the FED is going to SMOO the market. I don’t believe in the PPT but don’t forget this is an election year. Believe 50% of what you see and 50% of what you hear and run your money with low risk and fear.
Shed – guess what I Santa brought me for Christmas?
One 1971 Les Paul Deluxe. All original. Professionally owned by a big shot in town. Very worn and relic’d looking. Feel is incredible. Look is incredible. Best Paul I’ve ever had.
Wuzzit Porter Waggoners?
I just sold some SEED today. Next I will sell some NOEC. I’m banking large coin again this year so far.