TCM Notes : 5/20/09

• Tuesday's action resulted in a doji on the session, and while that shows indecision another major development took place. It was the tightest intraday range of the year at .88%. And wouldn't you know it; traders are upset about it! The VIX trades below 30 now, and the same people that were complaining about the volatility are now complaining about the lack thereof. Traders have a short memory and are never satisfied. Hence the constant search for that new idea, and the immediate rejection of it if it does not perform instantly. Volume has been sited again in today's session as it came in lower than Monday's except for the Nasdaq. It's a pre-holiday week so the low volume is normal in my opinion. And might the volume assertions be flawed since they are being compared to a time frame when volatility was sky high and hedge fund managers were turning portfolios over weekly. Complete redemptions of many certainly attributed to higher volume flows. Might we be setting up for a low volume, low volatility, steady as she goes melt up? Remember 2006? And you know one could argue that the fundamentals may be better now than in that fraudulent period. Let's not get ahead of ourselves though. Things are still fragile at this point. However, we have moving average support underneath us in the form of the 9,20,50,and 86dma (in some cases the 150dma too.) The 200dma still remains above us as the major resistance. Nasdaq has been battling this average and again on Tuesday managed to close above it. Many continue to doubt this move, and many continue to say we are in a new bull market. While I want to believe the later; my trader's hat tells me that this will not be true until all indices are above their 200dma with many of those shorter term averages crossing up through the 200dma as well. In the meantime trade smart, and stay vigilant.
• The dropping of those distributions days by IBD was clarified a little more by content editor Ken Shreve Monday. A function of time and percentage distance are the deciding metrics. The further we move away from a distribution day the less relevant it becomes. Also a move of 5% above the high of a distribution day warrants it as irrelevant moving forward. I knew time was one of the functions, and now it's nice to know the 5% formula.
• BAC priced another 800m shares at 10$ after the close today. That brings the total to 1.25B shares now at an average of 10.77. This is a massive amount of dilution in my opinion, but the trading in the aftermarket reached highs of 11.50. It would not surprise me if many of these shares were being snapped up by those still scrambling to close out short positions. More than likely it's pension/mutual fund managers whom are underweight the name and can now get a full position without putting the market up against them while trying to accumulate.
• TARP repayments will not be allowed until June 8th now. We shall see about that. The design for this next round of TARP PR will be to let those strong enough out in tranches. So we'll get the first week of JPM and GS paying back the money. Followed by another week of a few others, and so on and so forth. If done properly they could get a good four weeks of positive chatter from the pundits further helping to refresh public sentiment. The problem with that is the market will probably be much higher by the time the retail guy snaps out of the doubting phase, and they will most certainly come back in near the highs for the year. Happens like clockwork, and the boys on Wall and Broad know it.
• Computer Software has been one of the hottest industry groups in the market recently. Just in time for the Solarwinds IPO. I think they go public today. Ticker SWI. Some of these names are getting stretched in their valuations, so it will be interesting to see if SWI marks the top for the space; or confirms a continuation of the trend. Their software is for network management. My personal IT geek has yet to get back to me with his thoughts on this company (ahem, Mr. T I'm referring to you sir!) For those in the know www.solarwinds.com and www.thwack.com can shed more light on the subject. Being the chart monkey I am I'll just let price and volume tell me if the crowd thinks it's worth anything.