Stocks don’t like Mondays. This is the third Monday in a row that’s started with a gap down open. And volume has been on the light side each of these Mondays. What does it mean?
Low volume is usually interpreted to mean that there’s little conviction behind a move. That doesn’t mean the move itself can’t be large, just that it likely won’t follow through and may even reverse. Still, I can’t say I’d run out to buy stocks in anticipation of a rebound after yesterday’s drop.
My initial reaction to recent trading is confusion. Or maybe indecision is a better word. We’ve seen some anecdotal improvement in the economy. We are not at risk of melting down anymore. But it’s the start of summer, and stocks have rallied a long way and priced in some pretty rosy expectations.
If I can tie myself in knots with a bunch of "yes, buts", you can bet other investors can, too. So we can expect to see this lackluster, directionless trading continue until something tips the balance…
*****Yesterday’s downward global GDP revision from the World Bank might have done it. So might the end of the 2nd Quarter in 6 trading days. Or maybe it will be Alcoa’s (NYSE:AA) earnings report on July 7 (yes, Q2 earnings are that close).
*****On April 21, 2009, the S&P 500 broke above 839 and closed at 850. On June 1, 2009, the S&P 500 posted its first close above 936 since the rally began. What’s the significance of 839 and 936, you ask? Those levels are the intra-day highs and lows from October 10, 2008.
In essence, the S&P 500 has spent the last 2 months trading within a range defined in one day last year. The S&P 500 has closed above that range 9 times during the rally. Yesterday, it closed below the October 10 close of 899. October 10 was a powerful day.
*****A good technical analyst can be a scary thing. And Jason Cimpl, technical analyst at TradeMaster Daily Stock Alerts, has been scary good over the last couple of weeks.
In case you don’t know, technical analysis is the study of price and volume action to determine the market’s next move. Sometimes a good technical analyst sounds like they are staring into a crystal ball. That’s been the case with Jason lately.
He called last Monday’s sharp drop, got his TradeMaster Daily Stock Alerts readers positioned for the bounce at the end of the week, took quick profits when the market failed to make new highs, warned about yesterday’s sharp drop and is now readying his troops for another round of upside gains.
Whew! It’s a busy job but somebody’s got to take make the money!
If you’re interested in short-term trading, give Jason and TradeMaster Daily Stock Alerts a try. He doesn’t do day-trading (the average hold time is around a week) and he doesn’t trade options – just stocks and ETFs. There’s a 30-day trial available, click HERE for details.
*****We’ll be discussing our bullish outlook for commodity stocks in next Wednesday’s Video Conference. It’s titled Inflation Busters: Discover the Stocks to Grow and Protect Your Wealth and will air on Wednesday, June 24 at 6 pm. It’s free to attend, you can sign up HERE.