News out of Apple Computer showing 300,000 iPads were sold on the first day was a bit lower than expected and tempered the market’s mood early on. However, as the ISM Non-Manufacturing and Home sales figures gave the market plenty to cheer about as homes sales unexpectedly rose along with the non-manufacturing sector. Price action was solid for much of the day and we even saw a late day push closing the indexes just off their highs for the session. On the downside, volume did not jump higher, but with many leaders showing significant strength it is hard to question the new highs. Just another day in this uptrend as we continue to see nice action.
It would have been, obviously much better if we had volume higher on the day. Judging by some of our leaders getting HUGE volume and into new high territory. We’d be downright stupid if we were to think today was anything but bullish. This isn’t a 1999 or 2003 bull market by any stretch of the imagination, but we have a strong uptrend and we must adhere to it. Ignoring leaders is plain suicide and they continue to prove that following their lead is precisely the subscription for success.
Our chat room was full of banter about the day’s action and the multitude of leaders moving on volume. It was nice to see plenty of groups get action as well as individual names see new highs with big volume. Sadly, one leader is in the dumps, but with government hanging over its head there is reason to believe the stock will be under pressure for some time. This stock isn’t in terrible shape, it is above its 50dma, but has lacked any conviction at this moving average. It could go either way at the moment, but it is the only past leader suffering issues. If we do begin to see more than just one leader break down over key support levels it’ll be time to trim back holdings, but until that time happens we are going to stay long this market.
Outside the leadership we do look to the indexes to see what they are telling us and for now they are hitting new highs on light volume. We aren’t going to argue to hard with the market hitting a new high with volume, but it is something we’ll watch out for. Again, leaders are our number one indication regarding the health of a market. Number two is the indexes and right now with number one being strong we are letting the light volume new highs for the indexes slide a bit. If this were a normal bull market you’d bet you would see volume rush into this market. The lack of conviction to the upside will confound most, but if you follow the leaders you will not be confused.
Equity put buyers continue to be complacent but it appears folks are buying index puts at a rapid pace. The overall put/call ratio ended the day at .80, but this was in large part due to the amount of index puts being purchased. It would be ideal for a normal uptrend to have pessimism run wild in both equity and index options but for now it appears the strategy is to buy call options and hedge with index puts.
Stick with leadership and as always cut your losses!
