Choppy Reaction to FOMC’s Statement Leads to a Day of Distribution
A dose of positive news from the housing market failed to inspire traders to bid up stocks as housing starts jumped more than 10.5% month over month. Building permits jumped as well showing their maybe some life left in the housing markets. Regardless, stocks ignored the housing data and looked ahead to the Federal Reserve Open Market Committee rate decision. Initial reaction to the statement was positive as stock jumped to the highs of the day with volume supporting the move. However, by three o’clock sellers had taken control of the market sending stocks to a new low on the day. A late day bounce helped ease the pain. The market notched a day of distribution, but for the S&P 500 it is the first day of distribution since the September 1st follow-through day.
Distribution is quite normal for market up trends. Fortunately, for this uptrend we have yet to see any MAJOR distribution days. Last Friday’s distribution on the NYSE Composite index was simply due to inflated volume figures from quadruple witching Friday. Today’s move shouldn’t come as a surprise since we have come a long ways from the September 1st follow-through day. Now, we must be on the look out for further distribution and the market’s ability to AVOID any further distribution.
Today’s move shouldn’t have come as a surprise. Many market pundits have been waiting to call for the market to pull back and consolidate its gains. Overbought conditions are often cited as a reason for the market to pull back. However, while a normal market would seem to obey by the rules of oscillators this uptrend has ignored it. Until we begin to see leaders breaking down on heavy volume alongside distribution there isn’t anything to be alarmed about.
Leaders enjoyed gains today as BIDU stock followed up yesterday’s gains with another day of accumulation. Another stock Big Wave Trading has been long, ARUN stock enjoyed a great day’s worth of gains. Even a big winner JKS stock showed another day of accumulation. A small position of 100 shares of JKS would have paid for more than a years worth of our Platinum Subscription.
ORCL stock along with MSFT stock weighed down the NASDAQ contributing to more than half of the loss of the NASDAQ. Both stocks combined to remove more than 3.7 points from the index. Just two stocks caused the NASDAQ to notch a day of distribution. Taking a peek at the underlying stocks making up an index does paint the picture of what is actually happening. However, we still count the distribution day (just like Barry Bonds, we add an asterisks).
One day of distribution will not knock off this uptrend off its pedestal. However, any further distribution with leading stocks like BIDU stock will call into question the health of the market. Until then, we continue to hunt for stocks looking to breakout.
