Stocks Find Resistance, End Flat on Light Volume

Stocks run into resistance as volume dries up with many leaders pulling back in lighter trade.  A positive ISM non-manufacturing report gave stocks an initial push in the morning.  However, sellers were able to take control by mid-day as volume began to dry up.  The morning saw a surge in volume only to see volume die off as sellers took control.  It is quite clear this market needs to take a rest and would not be surprised to see the market try to move lower over the next few trading sessions.

Friday we have the all important jobs number and we are certainly seeing traders position themselves for it.  However, we are certainly seeing positive action from this market.  It simply needs to take a break and work off short-term overbought conditions.  At the moment 85% of stocks are over their 20dma.  We have seen this trigger some selling in the past and it wouldn’t surprise us to see the market to move lower.

We aren’t terribly concerned if this market decides to pull back.  Since this current uptrend started we have only seen one day of distribution, plenty of accumulation, and decent leadership breaking out.  This market is poised to continue higher, but before it does so it’ll be nice to see this market consolidate.

We still have plenty of stocks setting up quite nicely, just another sign we have a positive market.  Even stocks that are breaking out aren’t reversing hard on heavy volume.  It’ll be important to see these stocks move higher quickly, but for now they are holding up.  If we do see selling in these names pick up it’ll be a warning sign that perhaps this uptrend may not be as strong as it appears.  This is something to look out for and shouldn’t cause you to go out and sell your positions.  Simply put, if the selling continues and gains momentum it’ll be a warning sign to take more of your profits and be quicker with cutting losses.

Institutions haven’t been net sellers in this market so far, but if they begin to sell stock to not hesitate to trim your positions.  At the moment, we have positive action and we should continue to hold onto our winners.  Until we see leaders falling and distribution there is no reason to be able to hold through a small pullback.\