The Wrap 2/2/10

{+++}DR Horton reported its first profit since the Carter administration and XHB rallied and broke out on good volume, it also helped lift the market for a second strait day. I’m short XHB and got blindsided today, but my stop is at $17 and I  still think housing is doomed, at least that’s my story and I’m sticking to it.

Materials,oil and metals were up modestly after yesterday’s big pop and the dollar slipped a bit more as it is still letting a bit of air out.

We are in what I call a market state of “limbo” right now. We came down fast and have recovered quickly (too quickly?), to the 1100 level. We traded down to 1070 in a hurry and have now taken back 1100. I do believe that a close below 1099 though, puts 1070 in play again. I say we are limbo because so many charts traded down through their 50dma but now have traded back up to their 50dma. Either the bulls got sellers remorse and are buying everything back with a vengeance or we just saw a fast and furious short covering rally over the last two days. For my money I’m glad I’m fairly flat, none of our shorts triggered which is a good thing and these violent moves are almost impossible to play day to day. So I’m waiting for a trend again. What does that mean? For me a strong close OVER 1115 or a close UNDER 1099 on some decent volume will give be confidence to take  more aggressive stand long or short.

We could get another day or two of this action but the trend is still squishy, GOOG and AMZN look broken for now, GS isn’t out of the woods yet, and AAPL seems to be fighting for every positive tick, so the real leadership remains in dissaray, that of course can change, but as I said the other day stocks right now just look like trades and what I mean by that is a one day trade, maybe two, unless a new trend appears.

Look, if the market falters those stocks that have retested the 50dma will be great shorts, and I have a ton of them, if the market blast thought the 50dma to the upside they will become longs.


No names tonight and we will communicate tomorrow. Good luck and I hope you had a great day.

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