An optimistic start to the day as early morning economic data helped fuel the morning rally. Volume began and ended the day off light, but this an expected outcome as many Monday’s have started out with light volume. As 10:30 am rolled around the Dallas Fed Manufacturing report hit the wire coming in under expectations. Around the same time the NASDAQ put in its high of the day, but the index was not to return to the high. Sellers were able to keep stocks from rallying and by the 3 o’clock hour pushed stocks to their lows of the session finishing on the lows of the day. Although volume was light, today’s action was not favorable to those who are long this market.
The NASDAQ failed to hang onto its 50 day moving average. While on the outside this may not appear to be a significant development, but it could be a sign of further weakness. Why could the NASDAQ be signalling further weakness? Today’s market was lead lower by the NASDAQ, the leading market index and when it leads the entire market lower we need to pay attention. The most recent rally came on light volume, despite the follow-through day we did not see favorable action leading up to the confirmation day. Perhaps we can turn things around here, but it is best to protect your downside here. We’ll need to see a powerful move to reverse today’s price action.
Stock market trading is a difficult endeavor and we are constantly reminded by the price and volume action. The most recent rally could have you excited about further upside, but with defensive sectors leading the most recent rally has us give a bit of pause. Despite the rise in a few leading stocks, we still need further evidence we can sustain this move higher. What evidence? Perhaps a bit more accumulation in the market indexes would be a positive here. Pay attention to your stocks, if they do not act right you must protect your capital to have your powder keg ready for a new sustainable rally.
It is alla bout the stocks and your cut loss strategy. Stay prudent.
