Technology Soars: Volume is Dismal

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The market rallied nicely on Monday. Volume dried up, but a weaker dollar and strong gains from financials boosted most indices 1%. The banks were up mainly because over the weekend global regulators decided that certain new requirement imposed on banks would be less severe than previously thought. And why shouldn't bank regulation be less stringent, it's not like loose financial policy related to capital requirements has gone wrong before?

Although the market was able to move higher yesterday, the bulls didn't accomplish much. Volume was low and 1301 was not taken back. Additionally, the bulls closed the indices right at 1280, which has switched between resistance and support far too many times during the month of June.

Buyers need to slide back into the market today and reclaim 1280. And if volume can pick up, the SPX might be able to do something crazy like break out past 1301 and actually move in a new direction. Remarkably, aside from the first few days of the month, SPX has been stuck in a 3% range for June. Summer is known to be a slow paced period for the market. But this year seems extra lethargic.

I actually believe the activity will pick up considerably in July, but admittedly the big move could be lower. Earnings season for the second quarter of 2011 will be a big deal. ORCL and MU have already been crushed, so things do not look good for technology. But one good earnings report from Google (Nasdaq: GOOG) or Intel (Nasdaq: INTC) would right that ship. And tech stocks are doing well today with IBM (NYSE: IBM) EMC (NYSE: EMC) and NetApp (Nasdaq: NTAP) each up a percent this morning.

To the bulls credit, they have held support zones well despite an 8 week decline. And the price action for the month of June has mostly been consolidation. The market could easily jump from here and reach new highs this year.

I still favor the bulls, at least until our major support zones break down. Most indices look oversold and ready to move higher not lower. And a few, like commodities, have declined more than warranted. If the market can stage a rebound, I think commodities, and other beaten-up sectors like retail and financials, will outperform most sectors and industry groups.

As a bonus to all TradeMaster readers, because this could be a big opportunity, I have constructed a special report on gold and silver miners to buy as commodity prices recover. We have already added one of these stocks to our portfolio and may add another two in the upcoming sessions. The report was sent out to subscribers on Monday and it can also be viewed at our homepage.

The indices have fallen through a number of support levels on this eight week decline. The bulls have stabilized the descent over the past three weeks but now they need to start to take out areas of resistance over the next week - 1301 being most paramount. The weekend video "Stock Review" goes over new stocks to watch for the week and I encourage all members to watch the video over the weekend to prepare for the new week.