From the Trading Desk

Columbus Day brings Light Volume

Stocks close flat as holiday trading leaves volume on the light side

Holiday trading dominated today’s market with volume coming in very light as stocks closed flat.  Much of the talk on the street surrounded another round of QE by the Federal Reserve Bank.  The market did not get any economic news today giving relief after Friday’s job report.  Key psychological levels were held today as the Dow Jones Industrial average held its 11,000 market and the NASDAQ held 2400.  While these aren’t ultra-important it is still a positive signal the market is able to hang onto the levels.  A day like today is simple consolidation of gains and given the Columbus Day holiday we are holding up nicely.

Once again the cloud computing stocks look weak once again weighing on technology stocks.  The cloud computing space is far from over, but the stocks are signaling a time to base.  The move last week certainly signal weakness to come and today was just another example of why when you see a stock suffer heavy volume selling through a major moving averages you need to sit up and take notice.  Much like AKAM stock dove through its 50dma with heavy volume selling it is time to step aside and wait for another proper base.

There are still many doubters in this market and are citing overbought conditions.  And while it is hard to argue that we may look overbought these conditions can last for a long time.  This past year saw overbought conditions last over a month beginning in March of this year.  It wasn’t until the end of April we saw the market crumble lower including the FLASH CRASH!  Until we see further destruction from market leaders and major distribution will this market turn into a new correction.

This week we do see more economic data to be released, but our focus will be the action of the market rather if we miss or beat an expected economic figure.  This week will be interesting as Friday is an options expiry Friday.  Just as interesting was the move in the VIX today as volatility took a nose dive today even as the S&P 500 spent time in negative territory.  We can try to make two cents of the move, but it clearly is showing weakness in the index and positive pressure for stocks.  Keep it simple, over analyzing a move will only cloud your judgment.

Even with cloud computing stocks taking a hit, this uptrend remains intact and strong.   Until we see any further weakness and stocks to get long we’ll stick to the long side.  Fighting a trend is not something we practice.  Remember, always cut your losses short.

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