A Choppy Intraday Session Ends With A Bullish Close As Stock Indexes Go On A Run In The Last 45 Minutes; When In The Heck Are Leading Stocks Going To Lead This Market Higher?

April 24, 2009

Commentary by John “Author Ego” Ward

One word: choppy. I’m actually tempted to end this morning’s commentary here, as that single word tells you everything you need to know about yesterday’s action. But I guess that wouldn’t quite pass muster. Anyway, the market spent most of the day jumping around and only another late-day push, this time to the upside, gave the session the look of having accomplished anything at all. The Nasdaq lagged both the DJIA and the S&P 500, as did the Russell 2000 and S&P 600 (these small-cap indices, in fact, finished in the red). That’s not at all what we want.

Today the federal government releases the methods of the much anticipated “Stress Tests” of the nation’s 19 largest banks. This is sure to add to the volatility. You can imagine how investors will be going through this report with a fine-toothed comb, looking for any indication as to which banks might be in peril. This, coupled with reaction to the earnings of companies like AMZN, MSFT and NFLX, is sure to “stir the pot” and make a lot of people Thank God It’s Friday.

On the whole, I’d say Thursday’s session was just much ado about nothing. Leading growth stocks held up for the most part and potential leaders continue to build decent-looking bases. A few of the stocks that I either own or that are in my watch-list are exhibiting some erratic behavior, however. For the third time in eleven sessions TNDM had a big shakeout. Then ASIA fell like a rock to its 50 day moving average in the early going before being supported on huge volume.

Needless to say, it’s getting hairy out there. All this gets to what Market Speculator and I were discussing on the phone just the other day, the importance of buying right so that you have a “cushion.” When you have a decent cushion between where you bought a stock and where it presently trades, pullbacks and shakeouts mean something completely different to you than to that trader who chased it when it was extended and now is sweating the loss and selling, most likely at the low of the day just before the stock rebounds. Then you’re the one buying that poor trader’s shares from him and adding to your position in a way that doesn’t run your cost-basis up too much. This all just proves the age-old adage correct: “Well begun and half done.”

At any rate, expect the volatility to continue. Thursday was a mixed bag. Just be sure you’re not left holding that bag today. Stay disciplined and nimble. Plan your trades and then trade that plan. Stick to the basics, and as Market Speculator likes to say: “Keep it simple.”

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Posted by Joshua Hayes | Filed Under Market Commentary