Stocks Close Higher Again above October Highs

Another stellar day for the bulls as stocks rose across the board. The S&P 500 closed higher for the 10th time in 13 sessions but volume fell on the index. For the NASDAQ composite the index closed higher with higher volume and it was above average. Clearly the NASDAQ is the leading index of this current rally a sign we’d like to see. Given the run up as of late, it is hard to continue to knock the ball out of the park each and every day. Use the opportunity to cut laggards and stay on your winners. Today was just another solid day in this uptrend.

The market really got going with a big jump in home builder confidence. Finally, after so long we are beginning to see an uptick in confidence from homebuilders. It remains to be seen whether or not this translates into success, but the way homebuilders are acting higher prices are ahead. Banks were helped out as well, with an improving real estate market the situation should translate well for the “toxic” assets banks continue to hold. Let’s not forget the Federal Reserve holds quite a bit of mortgage paper and continued improvement in the real estate market will surely help the quality of paper held on the Fed’s balance sheet. It all boils down to price and volume and it is positive.

I am still looking forward to seeing Sentiment indicators tomorrow. Most notably the AAII survey as it has been quite bullish for the past two weeks. Bears have been decimated below 20% and you have to wonder if this market will have a quick washout to get the weak bulls out of their positions. This would be an ideal situation for us as it will show who the true leaders are in this rally. It would then allow us to focus in on the very best and take advantage of a new rally. Sentiment is an imperfect indicator and usually works best at REAL extremes. I highly doubt we are at one now, but we are at a point where it’d be nice to shake out some weak bulls then proceed with this nice rally. Remember October of 2010 and November of 2010? Quick shakeouts only to have us lead higher. Don’t be easily shaken out, follow the game plan.