What Healthcare Bill? Stocks Shrug off Bearish Talk Finish Higher

The weekend talk about a market correction was just that, talk.  Futures were spooked by the passage of President Obama’s Healthcare bill and what it would mean to companies in the US.  However, support was apparent from the start and stocks were able to fight off the sellers.  Volume was lower on the day, but that was to be expect as Friday’s session was inflated due to quadruple witching.  Price action was strong and although volume may appear weak we have to take into account the inflated value from Friday.  Overbought or not this market and its leaders remain strong.

While many were calling for a top from Friday’s action we at Big Wave Trading were not.  We simply do not see the signs of a normal market top, where are our climax tops?  Stalling?  Distribution?  Friday was a distribution day, but it came on options expiry where volume is always elevated.  Not too mention the end of day action where the market saw a rush of support running into the market.  It also goes to show you it is unwise to panic sell and not waiting for the close to act had you selling out near lows.  While many were selling out due to the healthcare bill we held steady and continue to hold the winners.

An interesting development was how the put/call ratio ended for the day.  The ratio ended the day at .91 quite elevated for a market at its highs.  Even more interesting the number of puts being placed on the indexes.  Today the number of index puts was 1,086,570 while only 574,952 call options.  Normally, for a market top we’d see sellers weakening and a put/call ratio below .60.  Unfortunately, for top callers they will have to wait a while before this market turns lower.

We continue to see strength in our market leaders and there are plenty of stocks building constructive bases.  If you are holding a stock and it isn’t moving with the rest of the market it may be time to jump ship and move onto a stronger stock.  At this point in the game if a stock is moving against you it would be best to trim that position rather than continue to hold onto it.  This market is poised to continue its uptrend given the price action of the leaders and the market.

Stick with your winners and cut your losses.