This Market Sure Is Giving Me A Sinking Feeling; However, The Charts In My Scans Say To Stay Focused On The Long Side, For Now

May 13, 2009

The market responded well to favorable Trade Balance numbers in the pre-market. However, the grapes turned sour and selling pressure took over sending stocks lower. Volume had tracked slightly higher on the NYSE and lower on the NASDAQ during the morning and early afternoon. Finally, we were able to see buying action step in and support stocks. We saw NASDAQ volume start to pick up as buying began to pick up a nice sign to see volume support. By the end of the day the NASDAQ picked up a distribution day but with volume only up roughly 1.3% from yesterday and the support it saw intraday it was a weak distribution day. Overall, a nice day with constructive action with support.

Using the McClellan Oscillator we have seen the markets rid themselves of the Overbought Conditions it has been in since the March follow-through. This pullback has been constructive, not perfect but it has been constructive enough to support a possible move higher.

A great sign is the number of New Highs made yesterday: NASDAQ 27NH vs 8NL. Even on a down day for the NASDAQ we saw New Highs beat New Lows by better than a 3 to 1 margin. A very nice sign for the index that had been leading off the lows in March. It’ll be important for the market continue to see stocks making New Highs and avoiding New Lows. A strong NH vs NL ratio helps supports Monster Stocks and their ability to give us Monster Gains!

We have to keep in mind we are coming off a market that had been all but destroyed by a near 60% decline. Overleveraged bank balance sheets, Subprime, Alt-A, Government intervention in markets all led to the disaster we called the Great Bear of 2008. Coming off this decline was and still isn’t pretty. It won’t be pretty until time has healed wounds and we can remove Government waste from the system.

We’ll know when we get a new bull market when charts are more clean and much less volatile. At the moment, we are seeing growth stocks forming very choppy, sloppy bases. The daily swings of many stocks are quite interesting to see. Getting wrapped up into these swings will only leave you dizzy and more than likely you will see your account in a downward spiral.

Do not give up, we’ll get our opportunities to take advantage of the market. Keep your eye on the ball.

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