Traders Shrug-off Disappointing GDP Revision as Small Caps Lead

GDP figures were revised lower once again as President Obama’s stimulus package of $780 billion simply was not effective enough.  Traders simply ignored the revision and plowed forward pushing stock prices higher.  Unfortunately, volume simply was not seen as we are heading into the holiday season.  As Christmas approaches we’ll more than likely continue to see light volume, but do not let that blind you from potential winners.  Once again small cap stocks lead the market closing near their highs.  We continue to see opportunities on the long side and will continue to take advantage.

Pre-holiday volume will more than likely be lower barring any “event” that would cause panic buying/selling.  We would love to have volume much higher, but with Christmas this Friday it is unlikely we’ll see volume.  Price action is terribly important when volume is non-existent.  Today we saw the NASDAQ and Small Cap indexes closed near their highs showing strength and a positive sign this uptrend may last beyond Santa’s arrival.

One thing we always avoid is fighting a trend.  At the moment, the trend is up and we do not want to be going against the grain.  Often times many believe they know more than the market and fight it.  It is a gambler’s addiction and will often leave those with this terrible habit an empty trading account.  Even worse, it will devastate their psyche and remove them from the stock market.  Perhaps this is the reason we have yet to see the retail investor get back into the stock market.  The 2008 bear market certainly wiped clean many of those who were trying to pick bottoms along the way.  The trend was down, but many decided to fight it and lost.  Similar to today, traders who are bearish have been hit hard by the rally since March.  Never fight a trend, go with it and until it ends that is when you change course.

Every secondary indication I look at McClellan Oscillator, New Highs, VIX breaking below 20, and a few others show this market can move higher.  These indicators along with the strong price action signals this market has more upside.

Stay positive as it will improve your trading results.  Always cut your losses short!

Do not forget to take advantage of our Holiday Special especially our yearly prices as we are giving an extra two months free when you sign up for any yearly package.