Monday, June 08, 2009

Late Day Support as Stocks Pull Back for the Second Consecutive Day on Lighter Volume

by Market Speculator

Wall Street was a ghost town as volume limped well below Friday's level all day long. As stocks opened lower selling took hold, but selling was well contained as stocks found support throughout the day. It was a bullish sign for the second straight day to clear overbought conditions that existed from last weeks run. Bulls took control at the end of the day pushing stocks near the highs of the day at the close. Once again showing the underlying strength in the market. Another great day of consolidation giving stocks time to digest the recent gains.

The level of New Highs continues to outpace New Lows, again underlining the strength of this market. Remember, we need to have the NH vs. NL ratio in our favor to get Monster Stocks. Monday saw 115 new highs while only 13 stocks made new lows. Quickly doing the math that is nearly a 10 to 1 ratio of NH vs. NL. An impressive ratio considering the market ended on the downside.

Leading stocks were somewhat mixed today lagging the overall market. Taking a look at most of the leaders they found support and closed in the upper range of the day. Typically, we want leaders to always lead and never lag the overall market. We'll be paying attention to these leaders as to how they will act in the coming days. It is quite obvious we'd like them to regain their composure and lead the market higher.

Interestingly enough small caps, who have been leading the major indexes over the past few trading sessions lagged the overall market just like leading stocks. Again, we'll need to keep an eye on how the Small Cap indexes perform making sure they do not continue to lag the overall market.

The stock market can be a viscious game to be played. Often times, though, it is the individual themselves who destroy their own accounts. Being able to adapt and evolve over time will allow you to stay in the game. William O'Neil and his portfolio managers learned this leason in 1999 when many internet stocks were flying high without earnings growth. In reality, they had the best price action without the earnings. Missing the run up in many of these internet stocks would have left you high and dry but not William O'Neil's portfolio managers. Being able to identify an edge in the market is one thing exploiting it is another.

There isn't much out there that is screaming we should be going lower. At this point, given what is in front of me this market should continue its uptrend. Distribution has tailed off and is non-existent at this point and we still have leadership. Until any of this changes, we'll continue the march onward and upward.

Stay focused and nimble.

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