Very little economic news hit the wires this week, but they would have been overshadowed by European headlines. Volume continues to be well below average suggesting institutions are and continue to be on the sidelines. Late in the trading session headlines emerged of the G-20 countries were planning a $600bn bailout fund for Europe. Unfortunately, bailing out Europe does not resolve the underlying issue. One would have though the market reaction would have been strong, but stocks by the close were off the highs of the session. Closing above the mid-point of the day was clearly a positive, yet a bit was left to be desired. A positive day regardless as the market appears to be in a holding pattern.
Financials look ripe and ready to breakout. It remains to be seen whether or not this will come to light, but they do appear ready to help this market push higher. Semi-conductors are another group ready to break to the upside. The only downfall here is volume, while price action is positive there hasn’t been big volume pushing into the unleveraged ETFs. Volume can come in late, but it will be needed to confirm any break into new high territory.
It’d be much easier to be bullish here if we had volume above average today. Despite volume being on the upside today, it was 13% under the 50 day average volume. A break above the 200 day should bring in buyers and would be ideal to have volume expand above its 50 day average. Last week’s above average day came in with end of the month rebalancing. It wasn’t institutions piling in intraday, but rebalancing portfolios at the end of the day. The market remains in limbo here and any break with volume will be the “tell” to the direction of the market.
As always, the first rule to success is cutting your losses small. And in this environment it is best to keep losses small!
