Thursday, March 21, 2013

Stocks Pull back as Volume Rises on the NASDAQ

European markets were dealt with poor flash PMI data with France flashing a very weak PMI figure. Futures were set to open lower ahead of the 830 data release. Despite a better than expected Jobless claims figure and inline housing price index futures simply couldn’t muster the buying power. Sellers took hold of the market just after the release of the better than expected Philly Fed survey pushing the market to the lows of the session. Like a broken record as the Feds POMO began the market found its footing and rallied until the close of POMO. It is quite uncanny how POMO keeps this market afloat. Sellers had one more shot to send the market lower and did so just before 2pm rolled around. However, the support at the 2pm lows wasn’t able to keep the market from closing above the mid point of the day. The NASDAQ did notch a distribution day bumping its count up to 4 days. We remain in an uptrend, but the caution flag has been raised. Cyprus continues to be a thorn in the side of the market here. It may just be an excuse for pundits to use as this rally has gotten long in the tooth. However, we are seeing disappointing earnings from the likes of FDX and ORCL suggesting the economy may not be what people think. Both these stocks were acting well up until their most recent earnings report. Coupled with distribution piling up is something we are keeping an eye on. Mind you, we aren’t trying to anticipate a turn, but preparing to take the signals in whatever direction. Sentiment remains tilted towards the bulls, but we aren’t at extreme levels we saw back in February. AAII bulls came in at 39% and bears at 33%. AAII is a volatile survey and a stiff breeze will shift sentiment. II survey saw bears drop to 18.6% from 18.8% and Bulls drop to 47%. Again, bulls aren’t at extreme levels while bears are nearing an extreme. Sentiment is by far a perfect science, but an interesting talking point. Sentiment like overbought/sold conditions can remain for long periods of time. The market does feel like it is heavy and will correct here. Unfortunately for those who try to predict these moves were wrong last month when the market looked like it was about to correct. Anything is possible and sticking with trend following will reap the greatest returns over the long term. Have a great weekend and best of luck on your March Madness bracket!

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