Bernanke panel spooks the market, but its about price and volume action as stocks consolidate gains
A disapointing jobless claim figures helped send stocks lower for the day, but it was late afternoon selling knocking stocks off the highs. Initially, the market was able to rally off its lows from the early part of the session pushing to the highs of the day. By the afternoon stocks began to stumble a bit and head back to the lows of the session. The final hour of trading was full of surprises with the market briefly notching new lows only to see support rush into the market and close just above the mid-point of the session. Volume rose on the NASDAQ and fell on the NYSE as the market avoided any signal of distribution. The trend remains in place as plenty of stocks continue to hit 52 week highs.
The number of bulls in the AAII survey fell from last week to 52.34% from 55.88%. Bears jumped from a low of 18.25 to 23.44%. Bulls remain in control despite calls for overzealous investors. A debate whether or not we are overbought or oversold is quite silly as we have witnessed in the past these types of situations can last a very long time. Trading off these is even worse! Many will dispute saying buy when there is blood on the street and sell when you are getting tips from a waiter…not for. However, this is a liquidity driven market and we are staying with the trend.
Trend changes happen after a rebound does not occur. We often see it with leading stocks weakening and distribution piling up. IBD made the error by using the Dow Jones Industrial average in November to call for a correction, but ended up being the wrong call. The NASDAQ is where we see the majority of market leaders and the NASDAQ is where we see the innovative companies reside. If the NASDAQ begins to stall and flash distribution as leaders weaken we’ll hede its warning. However, until we see this occur the trend remains intact. Remember, if you try hard for market turns you’ll end up giving away gains or worse add to your losses.
The trend is your friend! Stick with it and it will treat you well
