Thursday, December 03, 2009

End Of Day Selling Hits Stocks



Stocks were pretty much flat all day until the last half hour where we saw stocks get hit with selling as can be seen in the above chart.

When we look at the bigger picture, today's action I feel was significant. Below is a daily candlestick chart of the S&P. Yesterday's candlestick formation was a Doji which is usually a warning of a top or a pause in the trend. Today's candlestick pattern is a bearish engulfment which is a reversal pattern. The combination of a Doji followed by a bearish engulfment in my opinion is bearish for the market. We saw this exact same formation take place last September right before the S&P sold off.

Keep in mind that tomorrow is the Jobs Report and anything can happen but assuming the report isn't a market moving event, I feel from a technical standpoint alone we should see a sell off. As always, we'll see what happens. I must say, these past 2 weeks have been a tough gig!

7 comments:

getyourselfconnected said...

Could the sell off be related to the rough show Bernanke had today? If anythinghappens to that confirmation get ready for a "temper tantrum" instant 3-5% downside move. Remember what happened when TARP was voted down the first time.

ben said...

Do you think gold is in a bubble?
Will profit-taking in commodities
initiate the sell-off in S&P?
Look at the chart in BAC today,
it opens at high and sell off
all day long and goes below
the close of yesterday in
after-hour trading.
Today's sell-off may be a
bear trap if tomorrow's job
report is good or if the report
is bad, this may be the temporary
top we are all looking for. However,December is usually quite
bullish. Mutual funds who have substantial gain for the year
is relunctant to sell. This is
the psychology that is difficult for bear to overcome.

Kevin said...

HI Ben,

You are right, December is usually a very bullish month for stocks (santa clause rally) which is why I have my stops in the market. This week I've already cut my short position down in size as some of these groups began to rally out of nowhere. The short positions that have been working for me are the banks brokers and homebuilders which I will stay with until things change. Transports took my head of a few days ago so I bailed before things turned ugly.

Anonymous said...

Where do you see key support on the S&P , that is if you were long , where would you put your stop ?

Thanks
Mike

Kevin said...

Key support for the S&P would be below this week's low.

Kevin said...

Hi Get yourself connected,

I didn't hear what Bernanke said today and I'd rather not listen to him. I'd rather listen to what the charts are telling me. It would be nice to get an instant 3 to 5% downside move like you said... We'll see what happens.

Anonymous said...

The dollar is looking quite good here. Although it hasn't caused the stock market to crack quite yet (except Canada down 1% today, due to gold probably).

Kevin

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