Intraday Rally Fizzles as Volume Slides

Sellers were able to gain the upper had as stocks rallied was quickly sold off on Monday.  Neverousness in front of Tuesday’s onslaught of economic reports had bulls taking a back seat.  Tuesday’s economic reports feature numbers from Case-Shiller, Consumer Confidence, and Consumer confidence.  Fear over the housing market continues to run rampent throughout Wall Street and it showed as homebuilders were hit hard.  Volume ran light all day long, but that came as no surprise as Friday’s level were inflated from options expiry.  All in all it was a non-eventful day with stocks extending their gains, but in reality it was simply a flat day with mainly positive action.

The market had plenty of opportunities to give up Friday’s gains, but found support each time the market appeared to want to dive lower.  It certainly appeared short sellers took over the market and were able to knock stocks lower.  There is still lots of hesitancy surrounding the housing market and quite warranted I might add.  However, there is a tremendous amount of pessimism take a look TOL today.  The stock was sold heavily closing near the lows.  We may have a more bullish sentiment and cleared earnings season there isn’t much in the way of institutional selling that would hint at a big correction.  Until we begin to see heavy institutional selling this  market will more than likely climb higher.

Most importantly the action in leading stocks is very important.  The most important leading stock index was able to inch out gains and showed a bit of outperformance over the S&P500.  It is still early to get excited about a leading stock index beginning to lead, but it would be a welcoming sign.  A leading stock index I created was lower by -.15% but has been outperforming the market as of late.  Overall, leading stocks are acting nicely and if we can continue to see basebuilding in some of the more outstanding growth stories we’ll see some fantastic gains.

Today was a nice flat day where the market was able to digest Friday’s move.  There is nothing special we can gain from over analyzing the day’s action.  Leaders held up and the market withstood the selling even on light volume.  Last week we saw the market catch a bid after Monday’s global sell off, we have underlying support.  It is now getting the stocks with fundamental growth and proper price patterns to capture big gains.  We are on top of those stocks that are looking like they are about to explode out of bases.

Always cut your losses short.

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