Tuesday, June 19, 2012

NASDAQ Captures its 50 Day as Volume Rises ahead of the FOMC

Another good day for the markets as leading stocks continued to see breakouts. Volume rose on the day, but remained below its 50 day volume average. The market was able to ignore poor housing starts while building permits picked up more than expected. European markets closed higher calming fears over economic collapse in the Eurozone. Small cap stocks lead the market today with the Russell 2000 rising 1.8%. The NASDAQ was able to close with gains of 1.19%, but last hour selling did knock the index off its perch. We are not about to argue with the market and the rise over the past few days has been on better volume and we’ll follow the market’s lead. Tomorrow’s FOMC rate decision along side Bernanke answering questions from reporters will certainly have the market on its toes. Certainly we would want to avoid any sort of major meltdown ruining the current uptrend in the market. While we haven’t gotten a strong confirmation day if this market can avoid heavy distribution the better chances we have of continuing the trend. It is anyone’s guess what the FOMC will do, but given the recent testimony from Bernanke QE3 is not a likely scenario despite the market begging for it. Bernanke needs a plan out of DC of getting our debt under control by running surpluses. Without a plan it is very difficult to introduce a third round of easing with risks of skyrocketing commodity prices. In the end, no one knows what the FOMC will decide on and it is prudent to follow price. Switching gears and focusing on price the NASDAQ was able to regain its 50 day moving average. This is a very good sign for the market. Of course we’ll need to see the NASDAQ hold onto this moving average, but for now we have a significant development. In addition, we have quite a few leading stocks breaking out. They will need to continue the positive action for it to be a positive for the market. If we get headfakes from these leaders it will be a signal to get defensive. Right now, we have a green light from the market. Tomorrow will be an interesting day and it will be fun watching the action. Cut those losses!

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