The market was able to stop the bleeding temporarily by closing higher, but volume lagged. Institutions weren’t out in the market in full force scooping shares as volume sagged significantly behind yesterday’s level. Beginning the day the market was able to shake off another disappointing jobless claims figure. However, a better than expected trade balance was able to put a positive spin on things. Let’s not forget the NASDAQ had been down for four days in a row, a small rally is not surprising. Given the recent decline the market had to relieve the selling pressure. We remain in a weak market and given the close it is an indication the market will remain weak.
Perhaps another reason for a bounce was the overwhelming bearish sentiment amongst AAII survey respondents. Bulls came in at 24.42% the lowest since before the September 1st rally. Bears jumped to 47.67% week over week. Since the NASDAQ topped on the second of May sentiment has increasingly gone to the bearish, but this week it jumped considerably. Perhaps we see a short-term bounce to clear out these bears, but we don’t have what we had with the September 1st rally. Leaders continue to look terrible and there are very few stocks near buy points. If we are able to gain some traction and get a follow-through day we might be able to score some short-term gains. However, I am not banking on this situation.
Remember, seasonality plays a heavy hand in this market and with the given conditions cash will remain king! Yes, a little rally here will help out setting up shorting opportunities and we’ll be waiting to take advantage of. Let’s not forget this market correction will help setup future leaders. In today’s chat we spoke of two IPOs as of late that could setup and be BIG WINNERS when this market shapes up. It is ULTRA IMPORTANT to keep a watch list of stocks who are holding up and continue to shine from the fundamental growth side. We could see a quick three month correction, or even a 9 month correction, but we must make sure we have a go list when this market turns for a big run.
Stay the course, be prudent, and stay patient.
