Small Cap stocks lead the market higher along with the S&P 500
Dominating the trading was CSCO as the stock traded over a half of a billion shares as the company said it was “surprised” by the most recent quarter. CSCO trading accounted for the majority of share volume on the NASDAQ giving the index a day of distribution, technically speaking. However, many stocks including leaders found support from the get-go and closed in the upper end of the range. More importantly the NASDAQ was able to close above its 10 day moving average holding the important moving average. By the close stocks were at the highs and although we didn’t see any of the major indexes climb into positive territory we had positive movement.
It is quite surprising to see a company miss their earnings estimates by a large margin. But, the stock was punished for the lack of ability by the CSCO management team to foresee a moderation in the company’s earnings. The very bottom line is the mere fact we do not like to get into stocks who cannot demonstrate superior earnings and sales growth. CSCO will remain a laggard and we’ll continue to avoid the stock.
Sentiment continues to be sky high, even with Monday and Tuesday’s market action Bulls jumped to over 57%! AAII respondents are decidedly BULLISH on the stock market. Whether it is QE2 or corporate earnings the small investor is certainly exuberant. It would have been beneficial to see the number of bulls drop, but we can only deal with what we are dealt. Given the market action these sentiment figures have yet to raise too many concerns.
The dollar rallied back after yesterday’s dismal performance, but today’s move failed to retake yesterday’s high. Shorts have enjoyed the dollar’s slide in anticipation of the Federal Reserve’s QE2 and to see the index bounce off its lows is a natural reaction. The dollar’s fundamental position has yet to change, even the talk of fiscal austerity hasn’t move the dollar. However, increasing chatter about further European debt issues has helped scare the dollar higher. If the dollar is going to make a sustainable move to the upside we’ll need to see it thrust through its 50dma. Sadly, it may take another European debt scare or worse to reverse the dollar’s course.
Our uptrend beginning on September 1st continues and given today’s action it appears the market is ready to keep this going through year-end. Always cut your losses!
