Banks Weigh on the S&P and Dow while The Nasdaq Enjoyed a Day of Gains

June 17, 2009

By Market Speculator

Two banks, Morgan Stanley and Goldman Sachs were able to repay the government but the move did little to assist the Banks as they weighed heavily on stocks. Late day selling knocked stocks off their highs across the board but the NASDAQ composite was able to hang onto decent gains. Volume was higher across the board as the NYSE indexes were able to escape a 3rd straight day of distribution. A positive sign from the day was the ability for the leaders to hold key moving averages rather than the selling they have been experiencing over the past few days. Over the next few days will be important for the market as it will foreshadow the type of market we’ll be experiencing.

It shouldn’t come as a surprise the market has found itself with a headwind. We are in our 14th week from an attempted rally and it is quite normal for mutual funds and other institutions to lock in profits. More than likely, what we’ll begin to see is the junk-off-the-bottom will begin to fade. A few things can occur: the market rolls over or the market begins another uptrend with quality growth stocks emerging as the leaders. Quality growth stocks are essential for an uptrend to have longevity. At the moment, the market certainly has run out of steam for the time being. We will need to see quality growth stocks as leadership otherwise we will roll back over.

My stance is simply a neutral stance since we still have a few quality growth stocks showing up, but are still seeing troubling action in other leaders. In addition, we also have a few IPOs that are looking to be setting bases. We’ll need to see an end to the madness that is plaguing our most recent leaders and the beginning of tighter price action. Remember, the tighter the price action the better probability the stock has a chance to run higher.

At the end of the day, it is the action of the leadership goes hand in hand with the price and volume action of the indexes. The S&P 500 and Dow Jones ended the day flat while the NASDAQ was still able close in the green and in the upper half of the day’s range. The market is flashing a big “PROCEED WITH CAUTION” sign as it is giving off mixed signals. Remember, always cut your losses short as you DO NOT WANT them to become LARGE LOSSES killing your account. Taking profits early is still wise as we have seen many profits evaporate rather quickly. The market has yet to prove itself it can produce any viable market leaders.

Stay focused and positive out there!

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