Saturday, May 09, 2009

Big Cap Technology Holds Back the Nasdaq as Small Caps Lead the Market Higher on Lower Volume Across the Board

By Market Speculator

It was all about the April Employment figures released by the Government this morning which showed the economy lost 539,000 jobs during the month of April. March job losses were revised down to 699,000 lost. The unemployment rate, reported by the government was 8.9%. Futures reacted positively to the news and helped stocks gap higher at the open. However, big cap technology weighed heavily on stocks yanking the Nasdaq into negative territory. Volume was running hot during the morning hours and as stocks began to see support volumed tailed off into the end of the day. The positive on the day was that stocks did not accelerate to the downside, but lacked the volume and conviction to overcome Thursday's session.

Leading stocks were left behind has Super Regional banks led the market higher. Since the 3/12/2009 follow-through day on the S&P500 we have yet to see any of the IBD indexes lead this market. For a more sustainable move we'll need to see the Relative Strength lines of these indexes to begin to tick higher. Today, once again the IBD indexes lagged highlighting the weakness which is leading this market.

At some point this market will need to take a significant breather. Up to this point we have yet to see this be fullfilled, but we've seen signs that we could be on the verge of a pull back. Thursday we witness the market finally succumb to the selling pressure and end in a nasty day of distribution. Friday the market had the chance to re-establish itself and it failed to do so. This failure could be significant if we begin to roll over this coming week on higher volume. Ideally, the market simply rests here for a few weeks while volume remains tame allowing CANSLIM stocks setup in longer bases.

Up to this point, as to be expected we've seen very sloppy chart patterns where stocks are moving out of. Unfortunately, these tend to fail and do signal the market is headed for another turn. There are a few stocks that have made nice runs from the March bottom, but it is time to see these stocks setup in clean bases. Breakouts have a better probability of success when it is from a sound base rather than a sloppy base.

Keep your eye on the ball.

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