Thursday, April 30, 2009

Obama Obliterates Rally; Market Was Probably Looking For A Reason To Sell Though

After the buoyant action on Wednesday, market players were anxious for more. We started off with some very strong breadth and more momentum, but it was becoming increasingly frothy. President Obama, with some not-so-subtle jabs at "Wall Street," provided an excuse for the buyers to rest and some profit-taking to kick in. We rolled over at midday and after some choppiness finished at the lows. Of course, we once again saw some last-hour jerkiness before we had one final spike, this time to the downside.

So the question now is whether momentum is just going to cool off a bit and allow the bulls to regroup for another push higher or whether we finally see more downside develop as this big move off the March lows grows old and extended. Traders are obviously anxious for action and have been quickly jumping in every time we dip even briefly.

Momentum tends to be a sticky thing and doesn't go away easily. The essence of momentum is that it is persistent. If it just went away quickly and easily, then it wasn't momentum in the first place. So don't be quick to think the market will just die a sudden death, but once momentum does falter, things can slide very fast. The folks who chase momentum will sell first and ask questions later once support cracks and stops are hit. It is all about respecting the strength but staying disciplined when it disappears.

The good thing about this market is that there are some excellent opportunities in individual stocks. For example, RST caught some aggressive buying this afternoon and went out at its highs. You can be sure that plenty of traders will have it on their radar tomorrow.

Going into more detail, it was a lackluster finish for stocks today. Continued strength in cyclical stocks helped the stock market get off to an impressive start, but Thursday's trading session concluded in lackluster fashion after sellers moved against energy and financial stocks... The stock market began the session with broad-based strength and climbed as high as 1.7%. The positive tone followed a deluge of earnings reports, which were generally better than expected and helped investors look past another dreary dose of weekly jobless data... Buyers favored materials stocks and industrial stocks in the early going. At their highs, the two sectors were up as much as 3.9% and 3.0%, respectively. Materials finished with a gain of 3.0%, while industrials closed 0.7% higher... The interest in materials and industrials compounded their recent gains, which have been underpinned by the belief that such early cycle stocks will be the first to recover when economic conditions improve. That argument has pushed materials stocks up 16% in the past month and industrial stocks up 19% in the past month... Trading volume picked up in the final few minutes of the session to come in-line with recent trends. Until then, the apparent lack of conviction in the broader market's climb seemed to enable sellers to rally around energy and financial stocks and cause the broader market to buckle. Many expected money managers and investors to increase their involvement this session by partaking in some end-of-month window dressing. ... Energy finished as the worst performing sector by closing with a 2.1% loss. Oil and gas drillers were some of the weakest performers, but weakness in integrated energy plays like XOM caused the most damage in the sector, due to their market weight. Exxon Mobil faltered after reporting earnings results that missed analysts' expectations... Financials fell under pressure as investors pushed back against bank stocks, which led gains in the prior session. Financials closed 0.8% lower.

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