Market Analysis and Summary
On Monday, the major indexes exhibited powerful price action as they rallied across the board, although, volume declined and finished below average on the NASDAQ and NYSE. The current rally, which began last Friday is clearly lacking big volume. This is never a comfortable feeling for the bulls, especially on the heels of a distribution cluster recently formed on the NASDAQ. The distribution count still stands at 7 days on the NASDAQ and 3 on the S&P 500.
If the market were to roll back over from here accompanied by leaders breaking down on heavy volume we, would maintain a defensive posture and minimal exposure. However, if the process of healthy rotation remains in place and the general market continues to recover, it’s time to resume building long positions as entry points develop, however, slowly and with the utmost selectivity. Remember, “buying right” is your number one defense. Don’t buy a stock more than 1-2% past its pivot point and get into the habit of eliminating laggards and taking at least partial profits on extended names.
NOTE: Check when a company is due to report EPS, before initiating a position. These dates change frequently and sometimes at the last minute, so double and triple check to be sure.
The NASDAQ held up in a tight range on light volume after a solid 2-day rally back up through its 50-DMA. It shouldn’t take much to get the NASDAQ through the current area of overhead congestion around its 21-DMA and on its way back towards all-time highs.
The Russell 2000 fell 0.79% as volume declined and continued to hold above its 200-DMA.
The S&P 500 held up constructively in a tight range, above prior highs and its 50-DMA, as volume on the NYSE declined.
The DOW held up constructively in a tight range, slightly below recent all-time highs as volume declined.