Volume remained well below average, but ticked higher on the NASDAQ giving a day of distribution for the index.  The S&P 500 saw volume slip below Monday’s session as the index avoided its first day of distribution since early December.  Holiday trade continues to be light and it comes as no surprise to us given this stretch of holidays.  Distribution count has crept higher on the NASDAQ, but overall things do not look too terrible for this uptrend.  As long as this market can pull back without much further distribution we certainly can expect this market to continue higher.

For those who are not familiar with distribution days it is quite simple.  If volume is higher than the day prior and the index loses more than .30 it is a distribution day.  When the market flashes a cluster of distribution days within a four week period it typically indicates institutions are selling and lower prices are ahead.  By no means is this a perfect indicator of market weakness, but it does provide investors a key to when to get off margin.  At the moment, the NASDAQ Composite has 7 days of distribution and the S&P 500 has 5.  While not at extreme levels the NASDAQ count is raising a yellow flag.  As we noted yesterday a pull back here is not out of the question and if it is constructive it could produce some excellent gains in the New Year.

As far as our leadership goes it is not overwhelming.  Sure, we have some stocks giving us buy signals like LOCK last night.  We just have not had a prolonged downtrend lasting more than three weeks to setup strong bases.  Now is not the time to play hero and trying to make something out of nothing.  Remain true to the process and discipline is needed in order to execute.

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It will be interesting to see how tomorrow’s trading session will unfold.  Why on New Year’s Eve is not a half trading day escapes us and then to come back Friday for another full day.  Volume will likely not come in lower tomorrow and would be a perfect opportunity to consolidate further.  Further consolidation would help this market tremendously.  Odds would be favorable towards this uptrend continuing further.