A Stiff Wind Knocks down a Low Volume Rally
Posted on May 20, 2008
Filed Under Market Speculator |
Stocks were enjoying nice gains on lighter trade for the better part of the day Monday. Crude oil traded higher by the end of the trading session causing some fear in the market. However, the sell-off came on lighter trade and couldn’t produce any type of distribution. A few stocks showed major weakness: PWRD and GA showed major issues as both stocks broke down. PWRD’s chart is not all lost but the action on Monday points to more weakness ahead. The NASDAQ, the current leader among the major indicies was able to hold its 200dma. The S&P500 continues to lag the NASDAQ and lacks the accumulation we have seen on the tech heavy index. Even with the S&P500 lagging Monday’s trade does not derail this bull market!
I stock a profiled over at Trading Goddess’ blog HOGS had a great day showing a tremendous amount of support. This is a nice growth story and I am looking for the stock to consolidate so I can add into the position. It is a very small position as it has not had a run of at least 30% and formed a proper base. If it forms a proper base I will load up on the stock. For now, I will keep it small and be patient.
Real Money folks, especially Rev Shark seem to be confused with yesterday’s reversal. They continue to believe we are headed lower and simply do not see simple price and volume action. Not too mention New Highs trampled New Lows by a 3 to 1 margin yesterday. Although the S&P500 hasn’t seen the accumulation the NASDAQ has we must look at the leading index and watch carefully its action. The NASDAQ has seen only 1 distribution day in the past few weeks. The S&P500 and Dow have see 4 while the NYSE has seen 3. We need to get 5 or 6 days of distribution before we need to begin to pair back holdings and prepare for a decline.
Too many are on the sidelines, cash levels are rivaling ‘03 levels and not too mention the short interest ratio continues to hit all time highs. Sentiment may be bullish but the actions, measured by short interest speaks louder than any sentiment indicator. Its not what you say its what you do, many are shorting this market and many are in cash. When is the inflection point?
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