Another wild intraday session for the markets, but were unable to close in positive territory. Trading volume on the NASDAQ ended higher, but ended lower on the NYSE. The big news on the day was NFLX inking a deal with DIS on content. The stock raced higher lifting the NASDAQ along with it. However the moves weren’t enough to push the technology heavy index into positive territory. We still remain without a true follow through day and we continue to experience major reversals after breakouts: QIHU. If we are to get this rally going we’ll need to see volume jump along with Monday’s high taken out.
Tomorrow we’ll get a read on ADP employment change as well as the ISM non-manufacturing index. Friday’s job report will likely take a hit from Hurricane Sandy and should not be pretty. The ADP report should reflect the same and the market will likely be looking to see numbers better than expected. Attention will quickly change to the ISM non-manufacturing at 10 am EST. Last report was better than expected and since the ISM manufacturing sector contracted the service sector will be seen as the last hope. It is impossible to know the reaction the market will have to the report, but we do know the market will react and we’ll follow.
QIHU is another breakout on the verge of failure. At this point, in our eyes it has failed and trying to hang onto a stock after a breakout has now become far too dangerous. It will be interesting to see how GMCR and NFLX react over the next few days to see if their breakouts are able to hold. GMCR and NFLX are old leaders who have been beat up, but their price action will certainly give a clue whether or not any breakout from any stock will work. Keep an eye on leading stocks even these older leaders.
The VIX bucked trend and continued to move higher. It will be interesting to see how the fear index moves from here. While the market was making new highs in the uptrend the VIX did not make new lows. Typically we will see the VIX confirm the new high by making a new low. This time we did not see this. Despite rising volatility as of late we still see expected volatility remain relatively quiet.
Tread very carefully and have an exit plan! Cut those losses.
