Commodities rebounded on Monday after tumbling last week after a host of margin hikes. Stocks faired well with Small Cap stocks jumped more than one percent on the day. Volume dropped against Friday’s pace as institutional players stepped aside today. Volume dropped about 20% on the NASDAQ and 25% on the NYSE. Gold and silver rebounded sharply, but are both well off their highs. The dollar index on the day spiked to its 50 day moving average and faced serious resistance. Today’s action did clear oversold conditions completely, but remain below Friday’s high. Leadership held steady, but there the damage remains from last week. A defense posture remains the best recipe for success until this market shows a clearer picture.
A clearer picture would be flashing a follow-through like day and leaders reversing their recent gains. While the distributon shown last week would almost kill most markets this bull market has been anything but normal. Given this, it would not surprise me if this market moves higher from here. The key and our edge is we’ll use leadership stocks to guide us. If we get buy signals from leadership stocks we’ll take them leaving out our opinion. It is too dangerous to “guess” the next move of the market. Be prepared and take the proper signals.
Tomorrow the market will get to digest a few economic reports, but will be focused on the Import Price Index. However, trying to game the futures on the direction of the report is nonsense. However, it is interesting the year over year change in import prices is expected to be 10.5%. To me, this is a HUGE jump in prices paid. Month over month is expected only to be 1.8%, but still a big jump in prices. At some point there will be a tipping point and we’ll have a correction in prices, but for now they continue to trend higher.
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