DOW, NAS AND S&P ALL CLOSE NEAR HOD REVERSING INTRADAY LOSSES
Posted on May 6, 2008
Filed Under Profitable Trader |
The major indexes started off today with what looked to be a rough start but all were able to close near their HOD reversing earlier losses. To top it off, volume was heavier than the day before. While the Dow and S&P continue to show weak volume with both below the 50 dma, the Nas continues to show signs of strengh closing above the 50 dma. This means that big money is pouring in to these stocks and if this turns into a bull market we will find the leaders in this index.
Other signs of strength include new highs outnumbering new lows by a convincing margin. This is what we like to see, stocks making gains with increased volume, very bullish. Another thing to take into account is the growing pessism over the economy. Everywhere you go people are talking recession. The crowd is not always wrong. You want to be with the crowd during a trend, but the crowd is usually wrong at turning points. Everyone jumped on the recession bandwagon a few months ago and those that were able to get off have been making some money, while those that don’t follow the major indexes and pay attention to price action and volume are hurting. The NYSE short interest ratio is at an all time high of 12.82. This means it will take almost a full 13 days for all the shorts to cover. The higher this market goes the more they add to their short positions. If these guys start getting squeezed we are going
to make significant gains as they start running all over each other as they try to cover their short positions.
The fact is we are going higher. Yeah volume isn’t great so it pays to be cautious, but we are definetly showing signs of strength. There are a lot of good stocks here breaking out of nice bases on good volume, namely oil and gas which continue to be the best performing group.
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