Stocks Advance in Heavier Trade but Well Below Average

June 25, 2009

Stocks started the day in the red when jobless claims rose higher than expected. Final first quarter GDP was released showing a drop of 5.5% rather than a loss of 5.7%. It was the jobless claims that spooked traders at the opening bell. The red quickly turned to green as stocks found support and were bid higher thoughout much of the morning. Volume ran higher than Wednesday’s trade but remained well below average daily volume. Once again, it appears the big institutional players are simply sitting on the sidelines and continue to wait for an opportunity to get back into the market. Thursday’s action is not the type of day that would get you extremely bullish, but it was a positive development for the market as a whole.

It was nice to see leading stocks bounce higher than the major market averages. Again, like the major composite indexes volume in the leaders was higher than Wednesday but below average daily volume. Ideally, we’d like to see volume rush into leaders with price outperformance. Instead, we are simply getting weaker than normal volume with positive price action. Do not intrepret this as BEARISH movement it simply signalling we won’t see powerful moves higher. Remember, the leaders are acting relatively well with many finding support at the 50dma showing strength not weakness.

We certainly need the market to consolidate Thursday’s gains and avoid moving higher in a short period of time. This type of action creates overbought conditions quickly and can cause many leaders to whipsaw lower shaking many investors out of the stock. The more constructive action, sideways price movement the market can do the more healthy bases and breakouts will become. So far, we have yet to see many tight base construction, rather we have seen wide and loose price patterns.

The number of stocks that currently are above their 50dma, 100dma, 150dma is high but more positive than negative. It isn’t negative because we haven’t spent many months in an uptrend. If we had been in an uptrend for 6 or more months with readings around the levels we are seeing them now we could expect to see a sizeable correction in the near future. It took the market a little over 13 weeks to get where we are and taking a breathier here for the market is exactly what it needs to work off the incredible move since March.

There isn’t much we can get too negative on this market about. We aren’t super bullish either remaining somewhat cautious due to the lack of convcition being shown by the big institutional investors. So we’ll continue to plan accordingly: CUTTING LOSSES and taking profits.

If you haven’t done so I highly recommend purchasing William O’Neil’s 4th edition of How to Make Money in Stocks. The book begins with 100 charts!!! It is a great book and a must read.

Stay focused and positive out there. Enjoy your weekend!

Posted by MarketSpeculator | Filed Under Market Commentary