Joshua Hayes'  Instablog

Melt-up Monday did not disappoint traders in morning trading as stocks pushed to highs around 10am.  Unfortunately, weakness crept into the market as buyers seemingly went on strike for the remainder of the day.  Summer time trading was in full effect as volume was extremely light coming in 24% lower on the NYSE and 13% on the NASDAQ.  The market ended on its lows as sellers found very little resistance with the light volume.  Not a very good ending to the day as price action weakened and this market continues to issue caution to the wind.

Light volume is the normal phenomenon during the summer time months, but we continue to see a lack of volume come in on the upside.  All we really need to see is volume higher than the previous day to show accumulation.  At the moment, we have yet to see flashes of accumulation common with healthy uptrends.    On the downside we have seen volume surge like last Thursday.  We need to see this trend change and it will begin with accumulation building.

Apple Computer (AAPL) suffered more selling and continues to act weak.  The stock has been under distribution since the end of April.  Although the stock made an all-time high in June it came on light volume and was followed up with heavy volume selling.  Today the stock broke down on volume higher than Friday’s level even with the help of options expiry!  This stock, which is makes up 6.8% of the NASDAQ will continue to drag on the index.

An interesting development on the NASDAQ is it notched an outside reversal day.  Although volume was very light the reversal is significant and is a signal of lower prices ahead.  We continue to stay patient in the face of this market.  While we have plenty of charts setting up, this market continues to hint at staying in cash.  Today’s reversal is just another hint given by the market to stay away from the long side for now.

We are looking for market strength and its leaders.  While we have a good list of leaders it is important to have the cooperative for big stock runs.  In the meantime, there are a few shorts working and a few small longs.  Otherwise, cash is king in this environment. But, when things change, they’ll change quickly and the real question is will you be prepared or watch a big move pass you by?  Get prepared with Big Wave Trading by using our Dog Days of Summer Sale!