For the Second Day in a Row Stocks Stall

A positive Case-Shiller Housing report and a boost in consumer confidence lifted stocks in early trading.  Volume swelled as buyers stepped up and accumulated shares, but it wasn’t long before buyers simply stepped aside.  Sellers took over, but as they took over volume began to slow significantly.  Traders may have been looking ahead to more economic data later this week.  Most importantly will be Thursday’s GDP reading for the 2nd quarter.  The market doesn’t have too many days of worth of distribution, but the past two days are stalling days and if we start to see heavy volume selling it could be an indication of where the market will go.  With that said, we have plenty of leading stocks looking very nice.  We could be seeing rotation from the junk-off-the-bottom stocks into more the leading fundamental growth companies.  Again, another boring lackluster day with leadership trying to emerge.

The bright spot today was certainly the major leading stock index higher today.  My proprietary index was up .9% on lower volume, so outperformance lacking volume support.  Outside of leadership the next important piece of information we should be paying attention to is the major indexes.  It is important we pay attention to whether or not institutional selling creeps back into the market.  On the flip side, if we see heavy volume buying we’ll know that institutions are trying to accumulate shares.  The stalling price action would be far worse if we saw these intraday reversals come on volume.  The volume would indicate institutions are dumping shares as the market tries to make highs.  We just have to wait and see how the market digests the economic reports due out this week.

This market will more than like wait patiently for the GDP report on Thursday.  Wednesday’s Durable goods orders will most likely be linked to consumers’ confidence, but more than likely won’t have a tremendous impact.  The timidness of stocks almost has me wondering this may actually be a positive sign for things to come.  However, there is no crystal ball or holy grail in the stock market and we must pay attention to leading stocks as well as the overall market action.

Keeping in mind the 2008 BEAR MARKET the New High vs New Low index is a ratio that many are using for a bear argument.  During prior “bull” markets NHs are plentiful, but these “bull” markets emerge from 20-30% declines and NOT 60% declines.  We must use context when evaluating the market and this is a perfect example of where we can not expect to have an enormous amount of NHs.  Today we did pass 300 new highs, but in other bull markets 500 would be the normal mark.  If you noticed the NH vs NL ratio is still positive and we only need a positive ratio to see Monster Stocks show up.  It is important this ratio stays positive because if we get a powerful move higher it will signal to us that we’ll see leaders explode higher.

Remember, always keep your losses short.

Notes from Joshua Hayes: Take a look at this chart and tell me how “comfortable” you feel being HEAVILY long here:

My video is a must see tonight for subscribers. Free members my video technician almost has the video up. It is a must watch for this market right now.

top longs up TODAY w/ total returns since 1st buy: CISG 33% MDAS 32% SCLN 88% DAN 234% OGXI 27% FUQI 44% TEN 56% AEPI 42% BSTC 25% BZ 71% SOA 66% DRCO 34% PTI 77% PXLW 51% OMN 60% ACTG 67% AFFX 35% CAAS 27% CAR 97% VRTU 23% LAD 47%

Stock Market Commentary Video for free/SILV members: