The market got spooked as the S&P 500 hit new highs, but this time we did not see a high volume turnaround. Since August when the market hits new highs we have been witness to high volume reversals. It wasn’t in the cards to day as volume was lower across the board as institutions weren’t looking to unload their shares. Small cap stocks were the market leaders and have been the past three days showing the market may have some life left.
A good sign for the market was Small Cap stocks taking the lead as they were not looking healthy. The Russell 2000 and S&P 600 indexes were forming a head and shoulders toping pattern. Here we may be seeing a second right shoulder, but the recent volume is revealing the indexes may avoid rolling back over.
A better sign we are seeing is the leadership is expanding into better names. Quality growth stocks are seeing a bit of an uptick and not too mention technically strong price patterns. We have been enjoying the recent gains from these stocks and is encouraging to see for this market to rally into the new year.
At this point in time it is difficult to be fully invested. For one, we lacked the extra power with a second follow-through day and not too mention expanding leadership. While we are seeing better quality stocks setting up and breaking out we just do not have the “normal” amount to be confident this market has more room to run.
We have plenty of economic news to be released the next two days. Like the Dubai World default “news” overreacting to news by panicking will only lead you down a path of trouble. It is very difficult to sit back and not panic sell or buy, but if you remain disciplined you’ll be able to gain a better grasp on the market. Last Friday, those who sold in a panic more than likely are regretting their sale of stock.
Stay patient and nimble!
