Tuesday, June 30, 2009

The Second Quarter Ends with a Thud as Indexes Notch a Day of Distribution

The second quarter ended in bleak fashion as institutional investors were busy selling holdings. A drop in consumer confidence didn't help stocks as higher oil prices and economic uncertainity were major factors for the drop. There wasn't many places to hide on Tuesday, except for leading stocks. The NYSE indexes suffered heavy volume selling throughout much of the day only to see late day support. Over on the NASDAQ volume was subdued for much of the day until the last 5 minutes when a rush of volume hit the NASDAQ. Quarter end window dressing was nowhere to be found on Tuesday. With the quarter end behind the market and earnings season upon us it'll be important to see the market see some accumulation.

As it stands now the Dow Jones Industrial average is leading the way with 5 distribution days. Although 5 is a high number the Dow is a lagging index and its distribution days are minor not major ones. The S&P 500 has seen 4 distribution days but like the Dow its distribution days are minor. What I am focused on is the leading index which happens to be the NASDAQ and it only has 2 days worth of distribution. Remember, it is quite normal to see distribution show its face when the market has made an uptrend. We'll need to see the big institutional players step up and begin operating on the long side buying up quality growth stocks.

A positive market internal today was the advancers versus the decliners. One would assume the number of decliners would have outpaced the number advancers Tuesday, but this simply wasn't the case. The market actually saw the number of advancers edge out decliners. Not typical action of a major distribution day. In addition the number of New Highs versus New Lows continue to be very positive. The ratio was nearly 10 to 1, hardly the bearish action you'd expect. Adding to the positive internals was the put/call ratio jumped over 1.07 showing fear crept back into the market. Fear is always a necessity when keeping an uptrend intact. Market internals certainly dampen the distribution seen in the market today and tells us strength still lives.

As the third quarter begins it will be interesting to see how the market will react. More importantly, July 1st will set the tone for the market for the coming weeks. A few questions will be answered and the biggest one will be if the "big boy" institutional players will step up and accumulate stocks or will they continue to sit on the sidelines? After tomorrow we can assume Wall Street will take an early start to the holiday weekend kicking of festivities early. Until then, make sure you reign in your laggards by cutting losses short and keeping strength. Keep positive and stay focused!

"The point is not so much to buy as cheap as possible or go short at top price, but to buy or sell at the right time." - Jesse Livermore

my personal top longs the past three months UP TODAY: VOCL 133% PARD 74% ACTG 46% CRAY 63% VVTV 52% SIGA 58% DDRX 28% CHLN 85% PALM 76% SPPI 41% GOK 48%

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