An uneventful day of consolidation was the main theme for Tuesday. We had a quick morning move up before selling took place and we moved sideways the rest of the day. The good news is we managed to stay above the 200-day moving average for a second straight day but we made no ground towards the 100-day moving average, which will be a tougher resistance to break.
If we were to break the 100-day moving average, this market would no longer be in a downtrend. Many consider this just a correction in a downtrending market and I am leaning towards that belief at the moment but won’t discount the recent strength. Those who were predicting a top in 2009 were wrong the majority of the year.
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Technology, which has been a leader in the markets, did not fair too well even with strong earnings reported. Gold, oil, basic materials, and retail lead the negative sectors today. Even with the negative action, we should still consider this just healthy consolidation after a strong run-up. However, Thursday has unemployment claims and I’m not too optimistic about those figures. With the main earnings reports out of the way, we have little to focus on but macroeconomic issues now. As Bernanke stated, we have an “unusually” uncertain economy and those words should ring loudly over the next few weeks. Will that be enough fuel for the bears though?
While I’m leaning bearish now, I can not discount the V-shaped bounce we saw so often in 2009. For that reason, I am hoping for some bullish action tomorrow but will look to reduce/exit my positions before Thursday’s unemployment figures. If figures are better than expected, I can always aggressively jump back in. As I always state, protecting capital in a bear market is most important. The downside risk is too great, especially as the VIX moves higher.
As always, do your own homework to see if you agree. Have a good night and I’ll see you in the morning. Good luck out there.
Mike
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Tags: Market Commentary, Michael Kudrna
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