Ben Bernanke got the market off on the right foot after the 10am EST hour. Stocks were giving up early morning gains prior to Bernanke’s testimony in the House. The market cheered as the possibility of further easing, or what it is in reality printing money was put back on the table. Stocks stormed higher printing new highs until the 11:30 am hour. A few stocks resumed their up-trends, but the key factor in all of the day’s movement was volume. Both NYSE and NASDAQ saw volume trail behind Tuesday’s level a sign institutions weren’t rushing in to accumulate stock. By the time the afternoon came around the market began to sell off. Selling accelerated during the 3pm hour and a late day blip was able to save the market from closing at its lows. Today was not the type of action you want to see from the market and continues to warrant caution when approaching this market.
Gold and silver were the talk of the town as gold hit a record high today. Silver enjoyed a nice rally as traders are flocking to the precious metals as a hedge against a loss of confidence in the fiat currency. In addition, it is a hedge against the inability of governments to reign in spending and produce surpluses from budgets. Unfortunately, we have yet to demonstrate the ability to produce surpluses consistently. Fear continues to spread throughout the markets, but fortunately for us we have the market providing us with vital clues where we are about to head.
These clues are price and volume. Individual stocks continue to act ok, but our leaders aren’t showing the surge in volume we’d like to see for new bull runs. More importantly the two industries as I mentioned yesterday Financial and Semiconductor stocks continue to act weak. Financial stocks are always the first group to lead the market higher in a new bull market. Semiconductors are never too far behind. SMH ETF broke through its 200 day moving average yesterday and was able to find support and close above it. Today on the other hand, the ETF wasn’t so lucky trouble below the key support level in average trade. XLF did close green, but coughed up its gains on the day in a nasty reversal. A tell tail sign weakness continues to be in the market.
Volatility jumped today measured by the VIX. The index had an erratic day, but closing near its high and just below the 20 level. Option traders are pricing in further price instability and given the action in the market recently, it suggests to me we have lower prices in our future.
Raise some cash, take profits, and always cut your losses short.