At the closing bell stocks lifted off near lows, but still finished in the red with the NASDAQ notching a day of distribution. After the morning lows the market was able to find buyers to push back up into yesterday’s close. However, sellers would have none of it and pushed stocks back down. By mid-day stocks found its intra-day trading range. By the end of the day stocks began to slip and volume began to creep higher. Selling volume did pick up a bit, but failed to take the NYSE above yesterday’s level. However, the NASDAQ volume did clip Monday’s level and giving the NASDAQ a distribution day. Today’s distribution day is a red flat, but it wasn’t a serious day, but something to keep an eye on.
The NASDAQ and S&P 500 are still above the 50dma and 200dma which is a good sign. Today we even saw the indexes grabbing support at the 200dma. However, the issue here now is mid-June highs and whether or not the market can sustain a viable rally past those levels. Volume has yet to surge and show accumulation. Monday’s gains were on pathetic volume, you would think on a possible follow-through day institutions would be out accumulating shares. Unfortunately, we have yet to see this materialize. When we do, this market will explode to the upside.
The market is in a precarious situation here with a mixed bag of leadership and low volume as the market nears previous highs. Distribution days have been cleared due to the market moving five percent beyond the day. One thing to note was last week’s stalling day on the S&P 500 where we hit a new high and pulled back. Monday’s push past last week’s high was done on even lighter volume suggesting institutions simply aren’t buying into this move. Perhaps they can come in soon, but we’ll need to see some institutional sponsorship for this rally to continue. We love price gains, but we like when they are sustainable. At this time, there is a question whether or not this is sustainable. We have decent leadership, but can we see institutions to step up?
The percentage of stocks above their 20dma remains above 80%, considered high or overbought. For more than a week now we have seen this number hover this high suggesting we may have seen a short-term high for now. In April we saw a few weeks where we stayed at these levels before pulling back. This market does need a rest and digest this uptrend. If we can do so on lower volume and allow the gap-ups that have occurred to digest gains we’ll be off to the races. In the meantime, keep your losses short and keep your eyes on the prize!
Disclosure: Long PWER