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Joshua "MauiTrader" Hayes is CEO, President and founder of Big Wave Trading Inc., a Maui, Hawaii-based stock market advisory service. Hayes is a well-respected stock trader who combines fundamentals, technicals, psychology and money management to trade professionally for his personal,... More
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  • Stocks Extend Gains as Volume Slips From Friday’s Levels 0 comments
    Jul 26, 2010 8:31 PM | about stocks: AAPL, GOOG, YHOO, INTC, GS, MSFT, IBM, C, CSCO, SHLD, CMG, POT, GLD, NEM, BIDU, ISRG, DELL, PG, EBAY, PCLN, MMM, QQQ, SPY, PCP, GMCR, DIA, TBT, DGP, EWY, VXX, IAG, EGO, UGL, CRYFQ, DDC, OVTI, AVGO, BP, CTRP, SBUX, CRM

    The market took the new home sales data and ran higher with the readings.  New Home sales jumped from last months dismal numbers as inventories remain at record lows.  Volume ran into tough comparisons from Friday after the Europeans released their stress test.  At the end of the day volume ran just over 10% across the board.  However, the NASDAQ was just about average volume while the S&P 500 continues to be well below average.  At the close, the market pushed the S&P 500 back above its 200dma as the market closed.  Again, another nice day of positive gains with plenty of breakouts.

     

    The market is overbought in the very near term and does present a bit of challenge for traders.  It is tempting to chase after stocks that have moved nicely over the past few trading sessions.  Do not chase stocks as they tend to shake you before they continue their run.  A pullback has become much more probable and would present added risk going long a stock that has moved nicely.  Tread carefully and buy near proper pivot points.

    Sentiment has changed on a dime as the financial media continues to pump the great earnings reports.  Once again, stocks continue to show growth while the macro picture remains murky.  We aren’t economists but a recent piece in yahoo shows a completely different picture.  Here are a few highlights:

    •    In America today, the average time needed to find a job has risen to a record 35.2 weeks.
    •    More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.
    •    or the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.
    •    This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.
    •    Approximately 21 percent of all children in the United States are living below the poverty line in 2010 – the highest rate in 20 years.

    Not a pretty picture for the majority of Americans.  Much like the early 30s the market rose despite horrific economic conditions.  Just because the economy may “look” bad, corporate America is still thriving (regardless of your opinion)

    Overbought conditions can last much longer than you might expect.  We’ve been in this situation for more than a week and it can last longer, much longer.  But, now with many looking for a slight pull back we’ll be looking at signs of the health of the pullback.  Ideally, we’ll see 2-3 days of the market pulling back on lighter volume.  At the moment the market has flashed two days of distribution and any stalling and or distribution would certainly have this market under pressure.  Keep an eye on the stocks that have been breaking out and if they hold up.

    The market aims to confuse, perhaps we take out June highs only to reverse.  Nothing at this juncture would surprise us here.  Right now, we have some nice charts, some would be MUCH nicer with handles of 3 weeks or longer.  Until then, always have a cut loss strategy!




    Disclosure: No Positions
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