Ugly Close to a Rocky Day
Today’s close was a disaster. Going into the day, we outlined a trading strategy to buy strength, sell into key resistance levels and then wait for the market to determine where we go from here. Following this strategy worked wonders as you could have realized quick profits in the first hour of trading and then been in cash the remainder of the day. That is the good news. The bad news is the market saw resistance, failed to overtake it and ran for cover.
We have been following four stocks as a key momentum indicator. Baidu.com (BIDU), Research in Motion (RIMM), Apple (AAPL) and Google (GOOG) have been the backbone of the post August rally. These four stocks led the way lower last week and rallied sharply yesterday. If you believe, as we do, that these names represent the core trading positions of aggressive traders, we can look at these stocks to determine sentiment. At today’s close RIMM, AAPL, and GOOG were negative while BIDU was marginally higher. Considering that all four fell 5-8% from their intra-day peak, it appears that yesterday’s rally did little to breathe life into this market. Tomorrow is another day and we wait to see what the market serves us. However, the last hour of trading does not send us home believing that the bull is alive and well.
Additional Commentary (Blain Reinkensmeyer): The NASDAQ Composite ended the day down 1.1% to 2,644.32 after being up as high 2,698.35, the Dow Jones closed down .62% to 13,223.93, and the S&P 500 finished down .72% to 1,470.45 on the day. Interesting to point out is that the volume on the S&P 500 today was actually higher than yesterday, which makes today a bearish engulfment, not good for the short term.
The reversal today was almost expected as the markets gapped up right at the opening bell. You had a lot of the leaders mentioned above running into resistance such as key moving averages and with no volume support it was a long shot to say these stocks would hold up. Trading the price swings seems to be a reliable way to make quick cash in this current market, and may be for still some time to come.
Yeah I have been trading a few price swings to keep me afloat. At the same time I have kept my key holdings untouched.
I don’t mind seeing the close down a bit. Gives us a better shot of being open tomorrow. Folks had to take some profits after yesterday’s 300 point boom.
The S&P 500 bearish engulfment has me confident that the long term trend is in fact looking down and not up.
Blain,
By long term bearish just how long term do you mean? Bearish for the next year? two years? I’m looking at more at an intermediate term bearish (3 months), long term bullish setup.
For bears like my self it was a great day
I expect the U.S. economy to get worse as the boomer’s retire, the USD falls, and the national debt climbs. Wonders how long till the government is screaming North American Union and Amero. Boy, I sure hope that doesn’t happen.
If the CPI comes in favorable, I think we’ll have a shot at breaking through 1490. Until we break 1490, you’re right.