While market pundits wait for a Greece and its creditors to come to an agreement, stocks quietly put in a solid day. At the open it did not appear stocks would have a good day as the market pulled back nearly one percent. Small cap stocks were having a difficult time, but a solid reading from the Dallas Fed helped spur buyers step up to the plate. Volume ran lower for much of the day and helped the market avoid a day of distribution. This is the type of action you want to see as the stock market consolidates its gains and if the market continues to act like this it will bode well for the future.
Yes, the market may be a bit overbought still, but the recent action is quite encouraging. Recent price action in AAPL, INTC, and MSFT (the big dogs) is also very encouraging. A sore spot in this rally is the inability for the IBD 85/85 to show any relative strength. This index has been stuck in neutral for quite some time, but pay attention any pick up in strength would be a very positive signal. As we head into February I would expect a choppy month as February tends to be a tough month for the market. If this type of action continues it will only set us up nicely for a big rally.
The backdoor QE 3, the Federal Reserve dollar swap program is a precursor to what will likely be another round of quantitative easing. It is no secret during election years the government will do its best to prop up the market. You can bet your bottom dollar Obama and his administration will pull out all the stops! The problem isn’t just related to democrats as both sides are guilty. This does mean we’ll likely get a rally from another liquidity injection. QE 2 did produce some big winners including NFLX so it would be a prudent move to stay on top of this market. You do not want to miss out on gains!
Always cut your losses short.
