Monday, May 11, 2009

Volume slides Across the Board as Small Cap Stocks Lead the Market Lower with the S&P500 Not Far Behind

Opening the week stocks end lower on lighter trade as Big Cap Techonology stocks aid the NASDAQ finishing well off the days low. The S&P500 was unable to sustain any buying as the index closed near its low-of-the day. A day of consolidation is welcomed, but having a large percentage drop is a bit concerning. Let's not overshadow the NASDAQ's resilency here even though volume finished the day lower. Today, in of itself wasn't a bad day but will need to be taken into context over the next few trading sessions.

A positive note would be to see the Small Caps lead the market tomorrow in higher trade signaling the market is being accumulated. It'll be important that we do not sell off any further on volume as this would highlight there is more weakness to come. Remember, we have come a long way off the lows and have yet to see the market consolidate it's move. Ideally, we'll remain quiet in the indexes over the next week or two while we have the IBD Indexes taking charge. IBD indexes are a signal of strength and will alert us whether or not the current rally has the juice to continue the uptrend. Leading stocks in leading industries are our key to this the uptrend and we are in need of their leadership.

The issue for the indivdual trader is whether or not you have been caught up in the intraday noise. It is the market's job to wear out its participants and if you do not have a sound game plan you are going to be warn out along with your capital. If you are following the number one rules, cutting losses short you are most definitely on the path of destorying your capital. Cutting losses will save your portfolio and will keep you in the game for when CANSLIM stocks begin to start flying.

For now, we'll need the IBD indexes to sure up while the rest of the market pulls back. This will clue us into if we are going to see another leg up with this rally. As always, we'll be on top of the action and will react accordingly.

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