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Volume Falls Flat as Stocks Rise

|Includes: DIA, FAS, FAZ, IWM, PowerShares QQQ Trust ETF (QQQ), SPY

This is a big week as the FOMC Rate Decision will be released on Wednesday at 12:30pm EST. The lack of volume today is an indication big institutional funds are going to wait until the Federal Reserve Chairman Ben Bernanke speaks on Wednesday. Today would have been a bit more meaningful if there had been volume, but price action was decent. There were a few leaders getting support today with mixed volume, but not bad after the carnage over the last few weeks. We are still far from a new rally especially with the NASDAQ below its 200 day moving average.

If you do a post-analysis on your trades and plot them on a graph you will notice when the NASDAQ is below its 50 day moving average, let alone its 200 day you will find you lose when the NASDAQ is below its 50 day. Weakness begets weakness and you need to be aware of where the market is at all times. The goal is to have capital working when the odds are with you, not against. The gambler mentality will try to get you to “catch a bottom,” but the true professionals will only put capital to work when it is confirmed. Keep in mind not all confirmed rallies will lead to a new bull market. Perhaps we do run back up to the 50 day moving average, but without a confirmed market and new leaders we’ll likely fail.

Much has been made of the oversold conditions in the market. Sure, markets are oversold, but how can they not be? We are more interested in longer term trends then one to three day rallies. The bigger trend in place is a downtrend and it will take a bit of work to bring on a new bull run. New bull runs are not always easy to point out if you are not looking for the right signs. There is plenty of history to show when a new market is likely to work and when it is not. For now, from a seasonality stand point we do not stand much of a chance to get a rip roaring new bull market run. However, we could see a short run back up into the 50 day moving average across the board. Remember, if you are going to go long remember to cut your losses short and take profits just as quick.

For now, we remain in a downtrend with a tradable bounce likely over the next 1-3 weeks. The Fed will provide some fireworks this week and should make an interesting headline come Wednesday. Remember, have a plan to trade and trade your plan. Do not deviate from it. Always protect your capital by cutting losses short. It is your insurance plan!