Thursday, February 09, 2012

Greeks Agree to Austerity; NASDAQ Leads, but Small Caps Lag

The big news of the day was the Greek’s finally were able to come to terms on a new, new, new austerity agreement. Yes, another plan they will fail to deliver on. Volume ended the day mixed as NYSE volume slid underneath yesterday’s levels as NASDAQ volume jumped nearly 10%. AAPL was a clear winner today with their announcement of the iPad3 set to hit store shelves during the first week in March. Small cap stocks did not fare as well today closing in the red; one small blemish on the day. We continue to power higher in the market and the NASDAQ continues to see signs of accumulation. Today was another reminder to avoid fighting the trend.

Sentiment is getting a bit frothy according to the most recent AAII sentiment survey. The Bulls stampeded to above 51%. A level that is quite extreme while the bears finished above 20. Bears didn’t set a new low for this uptrend, but certainly the number of bulls set a new high. Is this “the” top in the rally? It is anyone’s guess given the amount we have run and not to mention the number of bulls. With that said, we still have plenty of stocks looking good and solid accumulation to make us believe we can continue higher.

This uptrend now has a few blemishes that could stall this rally. This does not mean it ends the uptrend completely, but it does signal we could see a quick shake out. So far, we see 1-2 hour shake outs only to power higher. Small caps were certainly a blemish, but today’s breadth was weak considering the market move. NASDAQ breadth favored decliners rather than the advancers today. Normally, an update will sport many more advancers than decliners. New highs continue to be healthy and be a positive force for the market. Given the number of stocks over respected moving averages and breadth weakening it would appear something amounting to a shakeout will occur shortly.

I could be wrong and we never see a shakeout, it is precisely why we react to price moves rather than anticipate them. Our success depends on our ability to react to price changes rather than guessing or anticipate a move. No one individual is that smart and can hit turns in the market often. Don’t anticipate the move, go with it and react as it happens.

Have a great weekend.

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