Once again stocks gapped higher at the open and finished higher on the day. The NASDAQ stalled out on the day as sellers stepped up their pressure on tech stocks. On the flip side the S&P 500 and NYSE composite indexes enjoyed nice gains with excellent finishes. Volume rose on the day as institutions stepped up their buying of equities. Leading stocks took a back seat today, but a few leaders took a break after leading since last Friday. Not too much to complain about on the day other than the NASDAQ’s stalling action.
Even with the NASDAQ stalling it has had quite a run and with precious metals the hot money left technology stocks. The positive on the day for the NASDAQ was the ability to hold the gap and the index did not stall at a new high. If we had seen the NASDAQ put in the day at a new high it would be a warning sign that the market may not have much upside left. Dig a bit deeper and you see the NASDAQ largest stocks who were leading the NASDAQ earlier this week simply took a rest and consolidated their gains nicely.
After significantly outperforming the S&P 500 this week the leading quality growth stocks took a break. This is quite common, but not all took a break. We had plenty of stocks move nicely today with volume. If you keep on the leaders and pay attention to how they are acting you will outperform the broader market. With the broader market’s price and volume action continue to slant towards the positive there isn’t a reason to think we can not continue higher.
On the sentiment side the number of Bears surveyed from AAII rose to 41% while bulls dropped to 35%. This sentiment indicator can be somewhat misleading, but it is important to note the rise in bears. You can also see this if you follow twitter and facebook and see the bears come roaring out every day. CNBC.com also parades those who believe a 10-15% correction is imminent. The market will correct 10-15% at some point, but we have yet to see the major distribution days pile up on the indexes. We could very well see the market pull back in lighter trade here, but unless we get a breakdown in leadership with massive distribution then there is no reason to “call” for a top.
Here at Big Wave Trading we are not day traders. During the day in our chat room there are those of us who take advantage of optimal entries on our leading stocks, but we prefer to hold then blow out of a position. There are certainly those out there who have a day trading system and works for them, but Livermore, Darvas, Wychoff, Dryfus, and O’Neil all show that holding onto stocks is how you build wealth. Sure, you can make money Day Trading but over the long haul are you able to watch tick by tick for more than 5 years?
Keep focused and enjoy the weekend!
