Wednesday, June 24, 2009

Volume Slips Across the Board as the NASDAQ and S&P 500 End Higher

The market shrugged off news from the FOMC meeting as well as the 5 year Treasury auction today. However, the big institutional money stayed on the sidelines as volume slid from Tuesday's action. Ben Bernanke and the FOMC decided to "do nothing," favoring the status quo over "change." Initial reaction from the market was negative but it did find its footing. There were a few tense moments where the market did look like it was about to crater, but support came to the rescue. Lacking volume, this market continues to look more on the weak side than the strong side.

Big stock leadership did not overwhelm the market with great price and volume action today. Although, some leadership did recover at key moving averages. They were few and far between, but still there. What is concerning is the lack of conviction on upside moves these big stocks have. Today we saw far too many big stock leaders move higher in price but in lower trade. This type of action is letting us know there isn't conviction to the upside and the path of least resistance for these stocks is beginning to turn lower. The big stocks are very good indicators of what is to come for the market and if they decide to run lower our market swill follow their lead.

Once again the market will be paying attention to the 7 year auction to be held Thursday. This time the attention might not be as keen as it was with the two year auction held on Tuesday. Traders are now conditioned to think the 7 year auction will go off without a hitch as the two year and 5 year notes were successful auctions. Although it will be interesting to watch the market reaction, it is nothing we are going to be basing buy and sell decisions off of.

The lack of big stock leadership and the low volume on the exchanges has me quite worried what we are about to run into. From the March lows to our most recent high in the June the NASDAQ has run almost 50% without any pull back whatsoever. The Shanghai index from its late October '08 low to its most recent high in June the index has run 76%. However, in mid-February to the first week in March the index corrected nearly 18%. For a few weeks that pullback has allowed the index continue its uptrend. It is about time we have our market take a break to allow this uptrend to continue its march higher. Unfortunately, it well remain unseen and we'll need our big stock leadership to start gaining more support.

While this market continue to be under pressure it is wise to err on the side of caution rather than try to be a stock market hero. Keep positive and your losses small.

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