Another Wild Intraday Session Ends With The Big-Cap Technology Stocks Leading The Nasdaq To Small Gains

August 31, 2007

Well, you can’t say it isn’t exciting for the intraday traders who like to trade the index futures and e-minis. However, if you have any time frame longer than a few hours this market is definitely a very crazy market to have to sit through indeed.

After yesterday’s follow-through, it appeared, early on, after the gap down, that stocks were going to build on those gains with more strong gains-which would have been a very bullish scenario. But like so many other times we have tried to rally, stocks reversed and rolled right over, with the indexes almost hitting their morning lows. But the dip-buyers showed up and did bid stocks higher to take them off the lows giving the market small losses on the big boards and small gains on the Nassy.

Now what interest me about the days gains in the Nassy is that for the second day in a row the new lows were higher than the new highs. Today it was 51 new 52-week highs to 60 new 52-week lows. And this comes after yesterday’s 36 new 52-week highs vs. 104 new 52-week lows!! Before this selloff started, new lows were beating new highs, and even now after a follow-through day where the indexes gained 2-2.5%, new lows continue to beat new highs. So this is obviously a problem and it completely shows that underneath the market is very weak. The gains today prove that big-caps are holding up this rally. Once the big-cap tech stocks go, I am sure that is when this market will go. But for now the march higher, so far, continues on.

The other thing that is fishy about this market besides the new lows is that there is no volume on this rally. Here we are nine sessions since the last time we have had volume over the 50 day moving average and there has been not one session where volume has even come close to this line. So after such a heavy volume selloff, we have a very low volume rally. This is why all the indexes, except the SP 500, carry a C or worse for ACC/DIS ratings.

The best rallies off the lows come on heavy volume. That means volume about 20% higher than the day before and well above the 50 day moving average on the follow-through day. This follow-through day, remember, only came on a 1% pickup in volume. So if this thing fails, there is nothing to be surprised about. As weak as this rally is so far, it is shocking that some believe we have hit the lows. Who knows, maybe we have.

If that is the case, I have been buying some recent longs with nice chart patterns and I look forward to a return of beautiful near perfect patterns. However, there are not many setting up so I will not hold my breath. Instead I will just relax and go with the flow, keeping all my longs and shorts small unless the pattern is really nice. Unless the pattern is near picture perfect there is no way I would risk my money on anything else.

Tomorrow should be very quiet and I doubt there will be much action. Heck, I wouldn’t mind if the market surprised me but with the long weekend coming up, I am sure wall-street will take off early. That normally means quiet and dull trading. In saying that, never short a dull market and I look forward to seeing you in the chat room tomorrow. We can all nap together. ALOHA!

Posted by Joshua Hayes | Filed Under Market Commentary