Wednesday, December 09, 2009

Are The Market "Tells" Back?

I had a busy morning, so am making this post after the close instead of near the open of trading. The market was weak most of the day, but a late day rally pushed the indexes into positive territory. That is the type of action I prefer to see, when the markets start off weak and then build strength into the close. This is the opposite of the action that we saw earlier in the week, when the markets would open strong, but then fade as the day wore on and close weak.

The chart below is of the Nasdaq 100, which led the action today. The reason I posted this as my chart of the day is that you can see on the chart below that today's action put in what is known as an "outside day". That is, we traded below yesterday's low, but closed above yesterday's high, meaning that today's highs and lows were outside of yesterday's ranges.

This is often a bullish sign, so we'll have to see if the action has legs. Yesterday I posted that the recent market "tells" that traders had been watching, namely Goldman Sachs (GS) and Apple (AAPL), had ceased to be market leaders. But today they were back, and led the action, especially at the end of the day. GS rallied nearly $5 (+2.8%) on solid volume, and AAPL spiked $8 higher (+4.2%) moving the stock back above its 50-day average.

Commodities had another rough day, with oil moving lower to $70.67 and gold closing below the $1130 level. Gold prices have now tumbled roughly -8% in just 4 days. That's a pretty sharp correction (which is why I took partial profits into the ramp), and a bounce could happen soon. I would not chase the bounce, as I think prices could settle in lower still before I would look to add back to my positions.

I added some individual names for a trade today, but will keep tight stops on them until I get a better sense of if this market can muster more than just a bounce.

long AAPL, GS, GLD


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