Tuesday, April 21, 2009

Piecing the Day Together

I don't like to make market calls because that is a suckers game.  However, as the day progresses, i like to view the structure of the markets which can lead me to make a working hypothesis. 

Today was similar to yesterday (inverse).  Yesterday we gapped open lower and went lower.  Today was the opposite. 

At 930AM I looked at the TradingRM morning worksheet to see what support/resistance levels we were close to.  824 was a significant support level and ended up being the low for the day and we had a nice rally from there.
Is this enough to get long?  Maybe not.  However, at the same time, I told the TradingRM desk that the small caps were outperforming the S&P.  The Russell and Nasdaq were outperforming its large cap peer.  The ticks at this point were not necessarily that bullish, but they certainly were not bearish.  Many regional banks had earnings before the bell today.  Most opened up lower and then got stronger.  When the entire group reverses, you must pay attention.   This prevents you from getting into trouble and shorting an uptrending market.