Boosted by earnings from Priceline.com the stock market rose once again but in mixed trade. The NASDAQ saw volume rise by one percent over yesterday’s level, but the NYSE failed to see volume rise with volume lower by three percent. Positive data from ADP and ISM service sector helped stocks push higher. Early morning selling helped closed the morning gap, but buyers stepped up once again and push stocks higher. Although stocks slipped up at the close the day was ended up being a positive one.
These massive gap moves have helped fuel this market higher. Time will tell, but for now these moves are quite positive for the market. Perhaps we’ll see a few short stroke or handles build upon these gap moves, but at the moment on the surface we have positives to hold on to. Do not chase stocks however, we have stocks nearing breakouts and focus on those. If other leaders pull back to ideal entry levels then we’ll take advantage. Until then, leave the chasing to others and focus on the stocks who are moving.
Taking a look at where the number of stocks over their respective moving averages we see 82% of stocks are over their 20dma and 78% of stocks over their 50dma. Perhaps we have become overheated in the near term as only 68% of stocks are over their 200dma. A few other oscillators and indicators are pointing towards a market that is overheated in the near term. A pull back could come, but if leaders continue to hold up or breakout it is tough to see any meaningful correction is on the horizon. Only further heavy volume selling will turn this market around, but with these leaders going it is tough to think anything serious is about to occur.
One thing to be mindful of is if we head lower and take out the 200dma and 50dma with volume. If this takes place, it is likely to send leaders lower, but until then do not anticipate a fall. With employment data set to take center stage tomorrow in the afternoon it’ll be interesting how the markets react to the figures. What will be watched is the unemployment percentage and whether or not it has risen since last month’s reading. The market perhaps has already priced in a weak figure and therefore, any weakness unless HUGE will certainly be o.k. Anticipating here is like gambling, the market is telling us we are going higher and unless we see something come out from left field we should continue the trend.
Always cut your losses short.
Disclosure: Long PWER