Market Analysis and Summary
Monday’s session was a quiet one. The major indexes fell modestly as volume declined across the board. Yesterday, the indexes gapped up at the open and finished the session higher as volume expanded across the board. Unfortunately, sellers appeared with about an hour to go in the session, which pushed the NASDAQ slightly back below its 50-DMA and kept pressure on the S&P 500, which continues to struggle below its 10 and 21-DMA’s.
Leading growth stocks continue to look healthy and constructive, which is essential to the sustainability of the current uptrend. For example, the majority of leaders which recently sold off with the general market, have found support at logical areas, e.g. moving averages, the tops of prior bases, etc. Additionally, large-cap, leader GOOGL broke out on heavy volume, with earnings due 10/27 after the close. Also, many other names, large and small, have formed constructive bases and have the potential to break out as well. It doesn’t hurt to see names like NFLX and GS, report solid earnings and gap higher on big volume either.
Currently, the major indexes are trading below their key 50-DMA’s and the distribution count is on the high side. However, the market’s leadership has held up quite well overall, despite recent weakness in the general market. Therefore, we would still consider buying a potential leader, with superb fundamentals, given an “optimal entry point.” However, we would not have more than 20 -30% of our total portfolio invested, given the current environment. Always remember, cash is a position. Not only do you protect your hard earned financial capital from getting chopped up in a volatile environment, you also preserve your mental/emotional capital.
The NASDAQ gapped up and rallied 0.85% on heavier volume, although it reversed off its highs late in the day and closed slightly back below its 50-DMA.
The Russell 2000 rose 0.59% as volume expanded, but still finished the session below its 10, 21 and 50-DMA’s, which are converging as they begin to arc over to the downside.
The S&P 500 gapped up and rose 0.62% as volume on the NYSE expanded, although it found resistance at its 10-DMA and backed off, with about an hour to go in the session.
The DOW rose 0.42 % on heavier volume, but fell shy of reclaiming its 10 and 21-DMA’s, which have been acting as resistance over the last 6 sessions.