Tuesday, November 23, 2010

Testing Last Week's Lows

After stubbornly holding S&P 1181ish all morning, the dam has finally broke and the index shed a quick 4 points and is now in the 1177 range.  This sets up for a retest of last week's lows of 1173 which fits in perfectly with the key 50 day moving average.

One positive is after months upon quarters of perfect correlation in this market as almost every stock would sell off... or rally... together (student body left trading) is we finally have more of a stock pickers market.  Individual equities with better stories are holding up far better than those without the past 3-5 weeks, which is a welcome change.  That said, the valuation of some of the names holding up makes little to no sense to me.  So ironically I am hoping for the 'waterfall' type of selling where everything is thrown out together... that includes you Netflix, F5 Networks, and Salesforce.com.

I continue to skew to future weakness as long as the S&P 500 holds below the 200 week simple moving average.... but the market has been whipsawing back up and down over that level the past week; not making it easy.   A break below the 50 day MA would be a nice confirming arrow for the bears, who have been on the endangered species list for months.    A close below 1170 would be a nice sign that a "gap fill" down to 1090 and 1110 is possible this year; those were formed almost 3 months ago.  Unthinkable just 2 weeks ago.

For the technicians out there we also appear to be forming the right shoulder of a head and shoulders formation....

EDIT 11:55 AM - Again, Wed and Fri around Thanksgiving are almost always benign days if not outright cheery as institutional money takes a break and the retail traders come out to play; so very nimble traders can go long due to "happy time" around Thanksgiving, with stops ready if the 50 day breaks.  I'm speaking more intermediate term with the discussion higher up the page.

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