OIL PRICES ARE ON FIRE, BUT INDEXES FALL ON HEAVIER VOLUME, THINGS AREN’T LOOKING SO GOOD NOW
Posted on May 22, 2008
Filed Under Profitable Trader |
Today didn’t start off all that exciting. Oil inventories were below expectations driving oil again higher to a record close. But that wasn’t what killed the market today. The Fed minutes were released where more inflation worries and a weaker dollar gave the hint that the rate cuts are probably over. I thought this information was priced in already but I guess I was wrong. This started a wave of selling that did not end until the close with the Dow, Nas and S&P closing near the LOD marking a distribution day for all three indexes.
Yesterday’s distribution day wasn’t too concerning but today’s is different. What is the difference? Volume today signaled that big institutional investors were selling. This is definitely not bullish as all major averages are failing at their 200 dma on heavy volume. I didn’t have a strong feeling about this rally anyway given the lack of volume so you had to wonder how long it was going to last. This doesn’t mean the market is now going to roll over and we better cover our longs, but it doesn’t mean that it won’t either.
There is only one leader in the market right now and that is oil. That’s it. Out of the top 10 groups with the highest percentage of stocks at new highs 9 of them are oil related. This is not market breadth. What would be nice is if we had more sectors performing well but how can this happen when the volume is so low.
The interesting thing is that there were 224 new highs today to 149 new lows, but 123 of the new highs were energy stocks.
Now is not a good time to start buying because all the stocks are too overextended past proper buy points. if you got in early you are sitting on some nice profits right now and you should probably take some of the gains you have made becuase things always come down faster than they go up and at the rate oil has been climbing, when it starts to sink it could fall fast. The best thing to do now is hold your cash in your pocket and have it ready to use when things turn around, because is the market they always do.
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