Stocks take a much needed rest after last week’s gains
A day of consolidation is what the doctor ordered for the market. Financials took a breather from last week’s gains as the majority of the market took a break too. Volume ran lower across the board as the NASDAQ settled flat and the NYSE indexes in the red. Today’s action was a natural reaction for the stock market after posting very strong gains last week. Although the NYSE indexes closed in red we did see buyers step up intraday to support the market. Always a positive signal when buyers are lurking to support stocks. A good day for the stock market digesting last week’s gains as we continue to see a healthy uptrend.
The market did not have any economic data to digest today. Last week’s barrage of election, Federal Reserve, and Jobs talk it was nice to see a day of very little news from the economy. It is interesting to hear the commentary regarding Quantitative Easing (QE2), but all that matters is the market reaction. Fundamentally speaking if you print money asset prices will be inflated. It is a simple equation and one that does not need to be overworked. Ride the Big Wave of massive monetary stimulus as stock prices will continue higher. The trend is your friend!
As traders we need to identify a trend and get on board. In September we identified a new uptrend poised to push up into the April highs. We had the proper tailwinds for this uptrend with plenty of market leaders showing promise and now with the Federal Reserve continuing to pump cash into the system it is all systems go for higher prices.
Leaders continue to act strong and we have seen financials begin to take hold. In addition, any stock dealing with commodities has finally taken shape and have begun to move. Gold and Silver continue to act well and rightfully so as Ben Bernanke continues to print money. When commodity related stocks, especially gold and silver it usually means the end of the rally is coming. This is something to be aware of and of course we’ll see a top coming with leaders breaking down and distribution. As for now, it is all systems go, but be aware of heavy volume selling and leaders cracking.
Always cut your losses short and let your winners run.
