August Closes a Volitile Month with a Fizzle
August 31, 2011 | Comments Off
Looking back at the month we were witnessed to a wild and crazy trading. The S&P 500 was down more than 5% for the month while the Russell 2000 index was down more than 8%. All the while S&P downgraded the United States Issuer rating from AAA to AA+. Today’s action could be very well the high point for the rally off the August lows. For the second straight day the NASDAQ was unable to close above the March and June lows. This area did act as support, but now we are seeing the area provide resistance for the market. Overall, today we witnessed a big stall day and the market banging up against heavy resistance.
The big volume today shows institutions were involved with the market in a big way. Volume was above average today, but with the market finishing well off the highs and under the mid-point we have to call into question this rally. Last week we saw the S&P 500 flash a day of distribution after the initial follow-through day. History shows a distribution day occurring a day or two after a follow-through day the rally will fail 95% of the time. We have since moved higher, but given the action today and some action amongst the market leaders it appears the market uptrend is under pressure.
Stocks Rise as Volume Expands, but Late Day Selling Sours the Day
August 30, 2011 | Comments Off
The market got a major dose of economic news this morning. Case-Shiller released its reading on the housing market and although prices fell again they did not fall as much as expected. Good news, relatively speaking. Stocks were able to climb off session lows, but were knocked back lower with a VERY troubling Consumer Confidence reading well below estimates. Consumer confidence has not been this low since April of 2009! Again, buyers were able to step up to the plate and power stocks higher. Volume ran higher on the day, but was below average. June lows provided some resistance at the end of the day when the NASDAQ tried to breach the lows, this is an area to watch. A good day with a bit of accumulation, but there is much more work this market needs to do.
There are plenty of bottom callers out there indicating the lows are in for the year. Why not, from peak to trough the S&P 500 was down 19% and small caps were down more than 20%. Enough for a correction right? Perhaps, but the issue we are seeing and we have been worried about is the lack of accumulation in the market and leadership. Institutions are not getting involved here as volume continues to indicate. We have a few leading stocks breaking out from bases, but these bases are very wide and loose. Given the market context, yes these patterns fit the mold, but they are far from what you would like to see in a new uptrend. Sound bases and quality leadership is needed and unfortunately we aren’t there yet.
Institutions Stay on the Sidelines as Stocks Roar Higher
August 29, 2011 | Comments Off
Hurricane Irene did not come as advertised helping boost stocks at the beginning of the day. A surprise jump in personal consumption helped fuel the early morning rally. The US savings rate dropped a bit to 5%, but the market liked what it saw and pushed higher. Even a disappointing negative reading out of the Dallas Fed could not stop the day’s rally. Institutions were not jumping for joy as volume remained below Friday’s pace and well below average volume. In new bull markets and even new uptrends within a bull market often show big price gains with volume. Certainly a negative for the market as we recover from August’s selling. Now up more than seven percent from the lows we continue to see nothing but a short covering rally.
Counter-trend rallies often occur during bear markets and they come with zero leadership and lacking big volume. It is quite possible we can continue to push back up to the 50 day moving average and even the 200 day moving average, but this rally will likely fail. We aren’t rooting against America, we are simply recognizing the market has undergone a shift and we are in the midst of a major correction. The stock market has and will continue to have uptrends and downtrends. What we are striving to do is to avoid the large drawdowns in the market and get aboard the big uptrends. Long-term success is dependent on avoiding those ugly drawdowns from market corrections (like we have been seeing). Avoid heavy losses even if it means missing counter trend rallies.
New Seeking Alpha Column
August 26, 2011 | Comments Off
Four High Quality Stocks Unfazed By The Volatile Tape
Split Volume As Indexes Fall Hard Despite Warren Buffett’s Investment in BAC
August 26, 2011 | Comments Off
The news story of the morning was Warren Buffett’s deal to buy $5bn of BAC warrants paying him a 6% yield. Bank stocks soared on the news pre-market cheering the oracle of Omaha’s investment. Ignoring a jump in jobless claims futures pushed higher into the market open. The party would last only for a few short minutes, the pop in the market gave an opportunity for sellers to push forward and knock down the market. Volume ended the day mixed giving the S&P 500 a day of distribution, but failed to notch a distribution day for the NASDAQ. Despite the NASDAQ narrowly missing the day of distribution the destructive price action overrides volume. The market remains in dangerous territory and we need to proceed with caution.
Just a few weeks ago BAC told the market it DID NOT need any CAPITAL! Yet, today we find out they actually need capital to stay afloat. The market certainly figured it out the past few weeks and with Buffett’s capital infusion it proves the market was proper in its pricing. Goldman Sachs was another big gainer at the open, but found itself succumbing to the pressure of sellers. Perhaps Mr. Buffett will go ahead and get another deal for warrants with GS, given the recent price action I’d say it isn’t out of the question.
My Interview With Kate Stalter at Moneyshow.com
August 24, 2011 | Comments Off
My Interview With Kate Stalter at Moneyshow.com
Thrid Straight Day of Gains for Stocks, But Volume Slumps
August 24, 2011 | Comments Off
A positive Durable Goods report help set the tone for early morning trading. Buyers quickly rushed in and scooped up shares, but the early morning cheer quickly faded heading into the late morning hours. As the NASDAQ reached last week’s gap it was an obvious place for sellers to step in and knock the market down. Not to be out-down buyers took the reigns and propelled the market back to the highs of the day by the close. One item lacking was volume meaning institutions were not involved in the market today raising a few cautionary flags on the validity of the move. Regardless, today’s price action was solid just lacking the oomph we’d like to see.
Gold was absolutely hammered today on big time volume suggesting the recent move is likely to be done for awhile. After a great run you would like to see the consolidation happen under light volume and small pullbacks. What we are seeing out of gold is something much different. Subsequently, our recent leadership involving gold and silver stocks took big time hits as well. The last time this occurred was in the spring of 2008 where we saw many commodity names, including gold stocks lead and collapse. While this isn’t likely to be precisely like 2008, it could be a shot across the bow of trouble ahead. Regardless, the price and volume action is speaking LOUDLY to cut your losses and run. It would be wise to do so.
Traders Shrug off Sluggish Economic News and Earthquake and Close Higher on Volume
August 23, 2011 | Comments Off
Futures looked mighty chipper to begin the day. Early morning trading saw sellers take control right off the bat, but the party would not last long for sellers. Shrugging off dismal numbers from New Home sales and a very disappointing reading from the Richmond Fed Manufacturing index, stocks moved higher. Volume run rates weren’t all that convincing until the end of the day, but kicked up when the 5.8 earthquake struck central Virginia. Market leaders, thin leadership moved higher and produced one breakout. However, the majority of leaders remain UNDER their 50 day moving average and proving very little. Confirming market rallies need new leadership and old leadership looking solid, today is just NOT the case. We have a new uptrend confirmed on day 11 of the attempted rally, but it appears very shaky at best.
Successful follow-through days normally have volume well above the 50 day volume moving average. Although volume was higher than Monday’s light day it was under the 50 day average, a sign Institutions weren’t excited about today’s move in stocks. In fact, the move appears to be more like a sharp rally you see in bear markets due to shorts being squeezed out of positions. Whatever the reason, big percentage gains like we see today occur during bear markets and not during solid uptrends. This market needs some serious help from its leading stocks if this uptrend has ANY chance to succeed.
Stocks Fly Out of the Gate, but Fade Significantly into the Close
August 22, 2011 | Comments Off
On the back of the Libya news stocks jumped higher out of the gate, jumping as high as two percent. A better than expected, but still negative reading from Chicago Fed did help boost stocks at the open. Sellers took control at the open as the market could not even hold opening prices. Gold prices did not join in the roll over and continued to move higher. A noon rally was able to recover about half of the day’s losses, but sellers took over once again pushing stocks back to the lows. Leading to the lows were Small Cap stocks and financial stocks. Once again, the stock market continues to act like it wants to go lower and today’s action was another signal this downtrend still has legs.
Our top leaders list went from 15 names to TWO names from last week’s action. We do not want to see this situation with more leaders getting knocked off. More and more leaders are being placed into the waste bucket as this market continues to push forward. Just because we don’t have leaders now it DOES NOT mean we will never see a good one ever again. In the future we will see new leaders form and breakout of solid bases. Until we begin seeing these types of leaders emerging, any rally will not last.
New Seeking Alpha Article
August 18, 2011 | Comments Off
