A European new bailout package, with the purpose of re-capitalizing banks sent the US stock market higher at the end of the day. Unfortunatley, volume on the NYSE was drastically lower. Over on the NASDAQ volume did creep higher, but barely and it was WELL below the 50 day volume average. Economic data once again came in disappointing. It has been awhile since we have seen some decidely positive move from an economic reading. Most could be described as “well, it could have been worse.” Today’s move came on less than stellar volume and with the late day move screams of a computer gone rogue. The market remains loosey goosey and until it can tighten up we can expect further volatility.
Many dip buyers are screaming and pounding the table to buy stocks right now. They are “cheap” because of a market decline. Many have not studied market tops and bottoms. Mainly, they subscribe to the theory of buying low and selling high. Unfortunately, dip buying only works during a bull market and not at a top in the market. Bull markets condition dip buyers until the end of a bull when they wipe out majority of their gains. We aren’t in the dip buying camp and can spot a big turn in the market.
Aside from the lack of quality leadership for this market and the plethra of late stage bases the market overall is still very wide and loose. Market bottoms tend to display tighter price action. A point to clarify, we aren’t looking for the precise bottom of the market. We simply need for the overall market conditions to improve and tighten up. Tight price action indicates strength in the market whereas loose price action indicates weakness. We can only go by how the market acts and not our opinions. If the market is able to tighten up and produce quality leadership then we’ll go head and get long. For now, the recent action indicates lower prices before we can sustain a move a higher.
Stay on top of this market by keeping a watchlist of stocks holding up. Our gold and platinum members are able to take advantage of our quality stock watch list. It is quite thin at the moment, but if it were to expand with an improving market it would signal a new uptrend has a chance of working. Stay on top of this market!
Cut your losses short