Stocks gapped down in the morning only to stay there for the rest of the day. The gap down credit went to LOW’s earnings and the blame for the market not rising throughout the day was given to higher prices in crude oil. The truth is that Wall Street is on vacation and there aren’t enough players to bid stocks up or take them down.
By the close the SP 600 led the way on the downside with a .9% loss, the Nasdaq followed with a .8% hit, the SP 500 fell .4%, and the Dow Jones Industrial Average lost .3%.
Volume came in around 20% lower than Friday’s already dull levels, on both the NYSE and the Nasdaq. This was easily one of the quietest non-holiday trading day of the year. Breadth was negative on the NYSE by a 9-to-7 margin and negative on the Nasdaq by a 2-to-1 margin.
After five days of gains, the market was bound to have a pullback, with so many oscillators getting into the overbought area. Does this small pullback indicate the start of something more severe? I am not sure but I am sure of two things: we are in an uptrend and fighting that trend right now seems silly; and never short a dull market. The one thing for certain right now is that the market is dull.
With the tape as quiet as it is this week and with stocks still giving mixed signals I still say staying in cash is the smart play. Staying defensive and waiting till the market makes its trend well more clear is advised. If this rally is the real deal, like I keep saying, there will be plenty of beautiful high quality stocks breaking out of nice bases.
For now, I have some shorts working, some longs working, some shorts not working, and some longs not working. I might as well be in cash but the trader in me knows that by being positioned properly with the charts when a trend become clear the early buys will help build profits for later plunges into possible BIG winners. For that to happen we need to have the kind of follow through like the October 2005 bottom or better yet the best kind of bottom possible like the March 2003 bottom. Those bottoms had much better leadership in those rallies than this rally does.
So with that I can not think of anything of significance I can add that has not been posted in this blog the past four or five entries. Please, read the post, to know exactly what the market is doing now. And that is the only thing you need to know. What happens in the future is irrelevant, as long as you are prepared. And that is the whole point of this blog.
Great luck out there and I will see you at Investors Paradise.
New Swing Longs (Keep them small): NEU VTIV MNG
New Swing Shorts: NONE
Longs Outperforming (non-IBD low vol. movers excluded): CTCI-66 VLG-50 SYKE-37 TYL-32 BAM-39 CXW-26 BWP-26 ALY TRMB CHINA WNR TRMA HSR DJO DIGE LMT OMRI BRR MA BMR RMR
Shorts Outperforming (all): USG-50 JOYG-31 NTE-29 ZRAN-26 GYI-23 BPFH-18 GTRC-15 BTH MAS PII POOL IYT SUPX PDCO AME HTLD HCBK VB WTI WERN FRC RS DSL CNI X STLD CPF XPRSA NCI DDE FDX USU ARO TZIX BEC SIGI ATPG NC CBST LAMR CCO KG KMR CPE CFC CEN KMP CBD EL
Completely Cover: AGP GKIS—You see why I tell newbies not to short and stay in cash during downtrending markets? Imagine if this was the only short I decided to take and I decided to load the boat in it, instead of going short 50 shares. I would be broke, owe my trading/brokerage firm money, and probably would have been devastated that I would have quit the game. Stay in cash.
Stocks On Radar: HWCC DK BEBE AHS CPA OLAB FRG GHDX LWAY STXS
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