Friday’s shortened session provided fireworks, but Monday’s morning session showed traders were hung-over from the festivities. It appeared institutions were simply stepping aside during the morning as traders were dumping holdings from Friday’s move. Another low volume boring day in the markets until 3 o’clock rolled around. After 3pm it appeared institutions began to accumulate shares. Volume rose dramatically as preliminary volume figures show volume higher than its 50dma. Small caps, which have looked terrible rose to the occasion and finished the day as the leading indexes. Price action and the volume surge at the end of the day is an encouraging sign equity prices may have room to the upside.
Cyber Monday was the big talk around Wall Street as e-retailers put out their best deals. Black Friday always provides consumers with deals, but this year these deals weren’t as abundant as many shoppers had hoped. E-retailers may have pounced on the opportunity to take those disappointed shoppers into new customers. By offering better deals than the big box stores these e-retailers may have been able to capture far more market share than many had hoped for.
The big news on the day was neither Black Friday nor Cyber Monday but Dubai World announcing only $26BLN was at risk rather than the $45-60BLN had been reported. Dubai World’s debt of $26BLN is hardly a blip on the $3T written off by banks from the sub-prime mortgage mess.
Small cap indexes have been lagging the overall market for quite some time had have been forming head & shoulder patterns. We have yet to see a volume break of the neckline but the overall patterns do not look encouraging. But, today we see the small cap indexes leading with volume (preliminary readings show volume higher). It isn’t the time to get excited as we’ll need to build on top of today. If we can continue to build on volume it will be what the doctor ordered for this market.
One day doesn’t make a market as we’ll need to see a continuation of what we saw today. Earlier in this rally I was looking for a 2nd follow-through day. It would have been more fruitful for this market to see the 2nd follow-through day a few days after the 1st, but if we are able to get one here it would signal we can be more confident going long.
Remember, keep your losses small and don’t be afraid to take a portion of your chips off the table. This market is unforgiving and profits can quickly turn to losses. If the market would cooperate and offer up big winners then we can let more stock to ride the wave higher. Until then, it is wise to take your profits.
