Wednesday, November 03, 2010

The Market Advances on Mixed Volume

Traders anticipate positive news from the mid-term elections and the Federal Reserve Rate Decision

Election Day is here and the market cheered its arrival. Volume on the NASDAQ slid higher while he NYSE volume skidded slightly compared to yesterday’s levels. Mid-term elections and the Federal Reserve were the talk of the market as many debated the effects we may see. Clearly the market was giving a vote of confidence today with the NASDAQ extending its gains. The one drawback was the inability for the NASDAQ to take out its April highs, but we did close just below those levels. All in all, a good day for the market and helped erased any doubt yesterday and last week may have brought.

Today was a great example of why opinions DO NOT MATTER in the stock market. Yesterday’s commentary was cautionary, but I highlighted the fact we need to focus on our stocks and not our opinions. Too many traders try to time the market perfectly and suffer great losses. Identify a trend and find the leading stocks and get long. Fighting a trend is a futile effort and will only lead to you losing more money. For example, in October Doug Kass was shorting stocks because the “rally has gone on too long.” If you stuck with Mr. Kass’ investment philosophy you have been beaten up as of late.

A big win was the move in small cap stocks as the Russell 2000 closed up 2.05%. Volume figures I won’t have available to later, but the move in small caps showed this uptrend more than likely has a lot more room to run. Small caps had been consolidating and lagging the NASDAQ, but today’s move was a good signal small caps are looking to make another big push.

The Federal Reserve’s key decision tomorrow has the dollar moving lower once again. Commodities have been flying as cotton has made another all time high. Sugar and coffee have seen decent runs as of late and with the Federal Reserve continuing to print more money commodities and stocks will continue to reap the benefits of money slushing around. Crude oil continues to push higher as it too as it benefits from the excess money. Clearly the dollar is in a downtrend as it continues to price in the Federal Reserve’s monetary accomodation.

Regardless of what is going in terms of news flow it is all about the stocks. So far we continue to see our stocks acting well and not giving us major sell signals. Of course, as a stock moves higher we want to take profits and to lock in gains. Stick with your winners and cut loose your losers!

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