Stocks continued where the market left off on Friday by moving higher, but left volume behind. With tomorrow’s Federal Reserve rate decision set to hit the market at 215pm EST institutions weren’t willing to throw their weight behind today’s move. The NASDAQ was able to clear its 2300 level as small caps led the market higher. During the last thirty minutes of trading the market did have a bit of trouble with the highs of the day. By the close the market was just off its highs of the day.
Today’s volume, preliminary estimates was the second lowest session of the year as if tomorrow was a holiday. The buzz about a second Quantitative Easing has been a go to reason for the market’s rise. In 2008 the Federal Reserve stepped in and provided liquidity, but it wasn’t until March 2009 the market found a bottom and moved higher. At the moment most market participants are expecting the Federal Reserve to act immediately due to a weak jobs report. It is clear institutions are waiting on the Federal Reserve due to the lack of volume in the market. Tomorrow’s reaction will likely be filled with choppy action, but at the end of the day we’ll have a good idea where this market is going to go as volume should run higher.
We definitely have plenty of stocks poised to move higher which is certainly a positive for this market to move higher. It is uber important to have plenty of growth stocks to support the market moving higher. At some point we’ll need to see volume support this move higher. The low volume advances is not a big positive for this market. Ideally, volume should come in higher than the day prior and not necessarily higher than the 50 day volume average. However, it is a huge positive to see volume higher than the day before and above average. But, seeing as this is August seasonality comes into play. Normally, summer time volume is light and below average. We’d just like to see institutions step up to the plate and keep this market moving higher.
Keep an eye on the leaders and if they begin to experience heavy volume selling in the wake of the Federal Reserve rate decision it will clue you in as to the health of this market. Heavy volume selling tomorrow will certainly give the market a black eye and raise a red flag. On the flip side, heavy volume buying will give us the indication this market has plenty of legs to continue its trek higher. Ride the wave, but do not anticipate that wave. As always cut your losses short.
Disclosure: Long EZCH PWER