Weak Close on Elevated Volume Closes out the First Quarter

A disappointing ADP employment report dampen the mood of traders heading into the last trading day of the quarter.  A positive factory orders report couldn’t muster buying action, but buyers did step up to push the NASDAQ and Russell 2000 into positive territory.  It wasn’t until the afternoon when sellers stepped up and took it upon themselves to knock down the market.  However, they were unable to shake the leaders as our leading stocks continued to act quite nicely.  At the close, we failed to see buyers step up to push stocks from off their lows.  Although the end of day action was ugly, leaders are telling a different story than the indexes.

The two stocks hurting the NASDAQ was CSCO and MSFT.  Volume surged into these names at the end of the day, but these two stocks accounted for nearly -6 points for the NASDAQ.  These two began the sell-off and finished it off.  Even though these two took down the NASDAQ they aren’t leading stocks and perhaps institutions have recognized this and are beginning to unload their shares.  It is anybody’s guess, but the day’s action coupled with volume shows institutions weren’t keen on holding MSFT CSCO into the new quarter.

Leading stocks continue to see positive action.  Two leading stocks fell on heavier volume, but they were certainly the minority.  Having so many leading stocks acting well puts the market action into perspective.  Leaders will always give you the sense of where the current market is heading.  I know I have been pounding on the leaders, but they are so important to the stock market you need to look at them everyday.  They are your go-to-signal for the market.  Stick with the leaders and you will be a better than average trader.

Index put buying appears to be the game many are playing to hedge this market.  Perhaps it is to pick a turn or simply hedging a position is anyone’s guess.  Today’s put/call ratio ended at .80 showing no real fear and no real complacency in the market.  Although, equity call options simply dominated equity put options.  At this point, the put/call ration is simply neutral not giving an indication in either direction.

The AAII sentiment survey will certainly shed some light if bears have been able to pick up some steam.  We saw last week, as the market hit new highs the number of bulls dropped to 32% while bears jumped to 34%.  If this trend will continue it will certainly lead me to believe the wall of worry still stands tall in this market.  Knowing leaders are in good shape and negative sentiment this market can move higher over the next few weeks.

Stick with your leaders and as always cut your losses.