Volume Drops to the Lowest Level on the Week with the Dow extending its Win Streak to 9 Days

A surprise uptick in consumer spending helped boost the market in the early going. Advanced retails sales jumped in the month of February by 1.1% (seasonally adjusted) much more than the expected .5%. Import prices rose 1.1% more than the expectations, but retail sales overshadowed the higher prices. Another early morning dip was once again found support as buyers stepped up to push the market to the highs of the session. Volume was lower than Tuesday’s level and it was even lower than Monday. Monday’s are notorious for light volume days and to see such a light volume day on Wednesday is not normal. We aren’t going to argue with the market and if it wants to reach these heights we are okay with it. To quote Buzz Light Year: “To Infinity and Beyond!” What was interesting about the retail sales figures is in order to get the jump in the number the government had to “seasonally adjust” the number. Actual sales fell on the month! Gas stations were the biggest benefactor of consumer spending in the month of February. With gasoline prices as high as they are it isn’t that hard to figure out this is where the consumer’s cash is going. Tomorrow we’ll get to see more Jobless Claim figures as well as PPI figures and endless squawking over the state of the economy. Volume has been low and we have certainly pointed this out to you. Options expiry weeks tend to have inflated volume capped off with Friday’s seeing tremendous volume. We do find it odd during an option expiry week we simply do not have the volume. Sure some of the stock trading volume has moved to options, but can it explain all of the volume loss? It is an interesting question and one that will not help your trading. However, it is still interesting to ponder where the heck everyone went! This market is in an uptrend and the small gains we have experienced since e last week’s follow through has frustrated many. We may have turned a new leaf and these types of gains are the ones we should expect moving forward for uptrends. No one knows, but the important thing here is to remain disciplined and do not try to be a hero. Cut your losses.

Stocks Advance on Higher Turnover

A positive housing start figure gave a big boost to the futures this morning including homebuilders after housing starts jumped 12% month-over-month. Initial jobless claims fell more than expected and despite a very negative reading out of the Philadelphia Federal Reserve manufacturing index the market was able to push higher. Volume on the indexes rose above average across the board, but overall volume still remains anemic. By 2:30 the market was at its highs for the session only to be disrupted by selling at the end of the session. While the end-of-day action was not ideal it was still a very good session for the market. The move in the market today has, in our minds wiped out all the distribution days we have seen in the past four weeks. Any distribution here we’ll begin to count and watch carefully. The lows of this week must hold as well if this market wants to continue hitting 52 week highs. You’ll hear plenty of pundits tell you where they are predicting the market should head, but they’ll be wrong. Predictions are for those who need to feel smart and need to feel they know more than you. If predictions were often right you’d have a heck of a lot more “wealthy” traders sitting around. Know what you are trading, where your entries are, how much to trade, and where you exit and forget the noise generated by Wall Street. Tomorrow we’ll get options expiry and a boat load of volume. Options expiry is a day where volume can be completely ignored. It will also be interesting to see how price reacts to the volume when we have raced higher after the Fiscal Cliff “can kick” solution. We can only trade off the current price information we have and not what we “think” may happen. Anything can happen and will happen and we accept this in our trading methodology. Get out and have a great weekend!

Volume Slips Despite the Market Finding Support at Session Lows; CSCO Soars in After-Hours Trade

Led by a solid rally from the Russell 2000, stocks found support more than once throughout the day. New home builder confidence was better than expected again as consumer prices were below expectations according to government figures. Unfortunately, the economic figures didn’t spark any sort of excitement among institutions. Volume was lower on the day and certainly a black mark on the day, but it was the fact the market was unable to eclipse yesterday’s high that is somewhat concerning. We’ll need to see the market build off today’s gains and have volume flood the market. Not a terrible day by any stretch, it simply just left us wanting a bit more from the market. In the after-hours session CSCO provided the market with some good news as the stock beat earnings and boosted its dividend. John Chambers is notorious for speaking what he sees (despite seeing a great economy at the end of 2007) and this time his comments weren’t as bad as they were in March. If you remember back in March CSCO’s earnings provided a downside catalyst with its negative view of the economy. This time around it doesn’t appear to be all that bad according to CSCO. The stock is trading more than 80 cents higher in after-hours session. Friday we’ll get the dreaded monthly options expiry. Volatility did pick up yesterday, but still remains relatively tame. Option expiry weeks are notorious for increasing intraday swings and volume in the market. Thus far, we have not seen either. Perhaps tomorrow will be a different day, but nothing is guaranteed. Earnings plays like KORS, FLT, and others have provided some good solid profits for those taking advantage of the morning gaps. Tomorrow we’ll get PRGO and ROST reporting earnings and tonight NTES will report. We’ll be paying close attention to these stocks as they open tomorrow and will take advantage if the opportunity presents itself. Another interesting point to continue to look at is the sell-off in bonds. TLT and TBT are two ETFs to watch but the 10 year has gone from 1.4% to 1.8% in a short time. That is one big move in bonds recently and it will be interesting to see how mutual fund flows react to rising yields. Remember, rising yields are well correlated with stock market returns. Keep an eye on yields. Now that hump day is over we’ll be looking forward to another fun summer weekend.