Even lighter volume returned to the New York Stock Exchange as the NYSE indices closed near the lows of the day. Over on the NASDAQ composite the index was slammed closing near its lows undercutting a key pivotal point. Volume indications are mixed as a few sources have volume higher while another has it lower. Regardless of whether or not volume was higher it is clear the path of least resistance is lower. Overall, volume is well below the 50dma suggesting Big Institutional players are simply not involed. The SMART index has lagged this market significantly confirming the most recent rally was driven by non-insitutional participants. Market leadership is shaky at best and without institutional support we’ll continue to see chop and slop from the market.
The market clearly is full fledge correction mode regardless if volume was higher or lower on the NASDAQ today. Lacking strong leadership this market is stand to continue to chop and slop around. At this point in time we are quite oversold on the near term so we’ll more than likely see a bounce Wednesday. The key on Wednesday will be if the bounce occurs on heavier or lighter volume as it will key us into whether or not institutions are looking to accumulate shares once again.
In the grand scheme of things this low volume chop and slop could more than likely be setting up bases for us when institutions decide to crawl back into this market. As the summer months continue it is more than likely we won’t see institutions come back into the market. Historically speaking the summer months never prove to be a great time for stock returns. There are a few exceptions like July of 2002, the rally then was only proceeded by lower price action and eventual lows.
Institutions could simply be waiting to see 2nd quarter earnings announcements focusing on guidance for the 3rd quarter and possibly the entire year. Many companies have decided to forgo issuing future guidance given the shaky economic conditions as well as Federal regulartory environment. Alcoa is set to deliver its 2nd quarter results Wednesday after the bell and its guidance for the 3rd quarter will be heavily scruntinized. It could very well set the tone for the remainder of the earnings season as it might set insitutional bias towards stocks going forward.
At this point, jumping to conclusions about the market and making bets is simply unwise here. The greats of all times always allowed the market to confirm their view prior to operating in the market. One of the greatest lessons one can learn is always listen to the market as it is never wrong. It isn’t out to get you or hurt you. Too many times we see the market be the “excuse” for ones trading rather than looking in the mirror. We certainly have a tough market, but we’ll remain positive on our ability to continue to make money. Cutting our losses short will always keep you in the game waiting for that Monster Stock!
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