It finally happened, stocks could not find the muster to continue their march higher. Volume was running hot during the first half of the session. Sellers stepped up and hit stocks, but volume began to ease and it continue to ease into the close. Stocks simply can not go straight up EVERY day and there will be normal reactions and today we were handed a normal reaction. Even with positive economic news including a big jump from the Philadelphia Fed Factor index couldn’t help stocks continue their winning streak. Regardless, the market had other ideas and was simply far too extended to continue the winning streak.
There was one blow up today among leading stocks as STEC dropped nearly 17% on an analyst’s note the firm would face competition in the near future. The analyst dropped its price target and the stock followed suit. Volume was massive on the decline and if it weren’t for STEC the leading stock index would have been flat on the day on lower volume. If more leading stocks suffer the same fate this market will not go any further. However, before we sound the alarm on the market we only have one big blow up and it isn’t time to get skiddish. On the flip side, we had plenty of nice stocks move higher on nice volume.
I do expect the market to have natural reactions as we move higher, it is apart of the natural cycle. We still do not have ANY distribution days on the NASDAQ so any pull back here is not concerning to me in the slightest. If we did have 5 or 6 and with leading stocks acting like STEC I would be a bit nervous. Until we begin seeing more leading stocks breaking down and distribution pile up this market will want to continue to move higher.
Interestingly enough Point and Figure chart for the NASDAQ shows a price objective of 2500. Here it is:
As you can see this point and figure chart price action is indicating higher ground.
At this point in time, if you are going to chase a stock that has broken out you are going to be too late. Chasing stocks is a terrible habit to get into, getting stocks as they breakout or bounce off support is the ideal entry. Volume is an important key to the picture as it tells you the strength of the move. Without volume you are not increasing your odds on grabbing a stock that could be a Monster Stock.
This market will continue to be ellusive to those who are trying to outsmart. The market will always be the winner in the end and it is best to play along rather than fight it. Remember the golden rule of speculating: do no harm.
P&F charts….just a couple of weeks ago, you mentioned S&P500 P&F charts pointed to the S&P index heading up while the NASDAQ P&F chart were pointing definitely DOWNwards for the NASDAQ index ?. What happened?…if P&F chart results, as just demonstrated, being so so incorrect within only 2 weeks time for the NASDAQ index why mention P&F as an indicator. Just stick to price and volume. Analyzing that action in your commentary, you are by the most part consistantly correct.
Hi Arnold,
P&F is the second oldest type of price action, candlesticks being the oldest. It won’t be correct all of the time, unfortunately it doesn’t include volume and I was pointing out the fact you need volume to evaluate the price action. Thank you for the comment, we appreciate the conversation.
Price and Volume is basically a way to confirm the move in your price charts. No one indicator is the end all of all.
Thank you for your comment, Arnold
Aloha.
Also I will remind new subscribers that it is impossible to always be right. In baseball the best hitters are right 30% of the time. So I wouldn’t put to much on what we think and pay more attention to what we say the market will do based on history. I think it is very obvious the market will do whatever it wants
Reminds new investors:
TA is not a crystal ball. TA is a windsock. The winds can change at any time. Do you argue with that windsock? So why argue with the market? It doesn’t make sense.