Markets Stage Great Intraday Rally; However, Volume Was Weak And Breadth Was Poor

The major market indexes all staged a nice intraday rally, today, to help them close up on the day. However, these gains came on lower volume which was preceded by a distribution day. Usually you want the opposite. The Nasdaq finished up .3% and the SP 500 finished up .3%. But breadth was poor on both the NYSE and the Nasdaq. The Nasdaq even had negative breadth.

This along with the weak action in my own personal portfolio definitely indicates we are in choppy waters. The markets five distribution days in four weeks and year long churning also confirms what my longs are telling me. That we are not in a bullish market anymore and caution should be advised. Another inicator is how leading stocks are doing and the IBD 100 sank a bit over 4% for the week.

None of this should be new to readers of this blog as I have advised multiple times this year to sell into strength, take profits, cut losses on weaker performing stocks, and keep new longs very small. I have also mentioned the recent churning action of the indexes. If you now study on your daily index charts of the SP 500 and Nasdaq you will see what I was talking about.

The small cap indexes are holding up. Their intraday reversal gave them some very nice daily charts with them bouncing off their 50 dma's and creating a nice daily candlestick chart pattern. The big cap stocks have been seeing some renewal also as evident by the Dow Jones holding its own during the current choppy markets.

All of this creates a very uncertain environment and helps discourage traders from trading every daily tick. That can only be a good thing. This uncertainty creates the downtrend that we need to setup new bases for new longs. With the lack of really good chart pattern in high quality names, it may take a while. This is positive, none the less. There was too much bullishness, this year.

Why I am still not ready to short this market outright is that if the markets do get ugly there will be plenty of time to find the ripe shorts. The shorts will come up after the trend is in full force, trust me. I have seen it over and over. Just go read the first six months of this blog. I was shorting many times and doing quite well. Why? Because I was going with the trend and the trend was already down and obvious before I started shorting. Patience is always a virtue.

Another reason I am not shorting is just look at my longs I am still holding. They look great! Most of them dont have many dings in their armor at all. The long term winners that have gotten hit are gone. The stocks that did not perform are gone. But the ones that are still in the portfolio are doing well. Until they breakdown also, I will stay long with an exploratory mind towards shorts.

One more thing to mention. After the 30 yr auction treasury you can now see an obvious yield curve inversion. This is now very obvious and I do believe this is going to have an impact on stocks. And usually that is not a good impact.

One more thing to mention, again. The Fed is not done. I would not be surprised to see the rate go to 5%. I hope it does not happen but remember if rates do rise that much more that gives us at least another four more months of a rising market. Remember stocks rise during rate hikes and fall during rate cuts. It is history, it is facts. Go "Google" it!

Maybe that is why I still have so many nice charts that are longs. That doesn't mean the new longs are going to rock. Those have been terrible recently. But at the same time there is no reason to sell the ones that are working either.

We shall see what next week brings. Good trading everyone!

New Swing Longs: CHINA HEIA A PEIX

New Swing Shorts: BYD

Longs Outperforming Market: CNTF EVST-30% VIMC GOL-67% ATHR-61% AIX BBD-133% GES-76% TRAD-52% CIB-30% LDSH-60% ADBE SIRF-130% ORA-74% JBL FFIV EFII ITRN ASVI NNDS ROK STX LTM TRO GMXR-225% PKE RAIL-51% NGPS EDS QCC MORN GIGM-60% CHRD MMUS DIET-38% NKTR LRCX-42% BGC-43% STXN-36% RDCM-29% UBS RES-119% PPCO-28% BE SNPS SILC-102% NOVA

Shorts Outperforming Market: NONE

Stocks On Radar Screen: KEYW ARII AVNX SCI MNKD AXO AUXL MTSX DCO