After a shaky start to the day stocks were able to rebound and push higher into the close. Any short-term oversold conditions were wiped away with the day’s action. Volume ran lower across the board, but it does not come as surprise as yesterday’s volume was quite large. Medical stocks were once again stars of the day as the NASDAQ led the market higher. ADP jobs figure was better than expected, but the Challenger Job cuts were up more than 200% year over year. ISM Non-Manufacturing fell month over month, but was better than expected. This market keeps trucking along. Today was Day 2 of attempted rally and we’ll continue to monitor for a follow-through day.
Friday would be Day 4 of this most recent attempt at a new rally. While in the short-term we can certainly move higher we simply do not have the broad leadership needed to produce a rip roaring rally like we had in September of 2010. Certainly, a move back to the 50 day moving average and even the 200 day moving average can not be out of the question. It would be nice if we had more than just medical stocks pushing us higher. The prudent move is to trade what you see and not what you think. You can be as bearish as you would like, but it doesn’t help you make money from this market.
The most recent Investors Intelligence survey was released showing a wider gap of bears than bulls week over week. The spread is now more than 10%. It is noted we do have more bears than in March 2009, but we aren’t near the 2008 levels. Ultra-bearish views on the market from newsletter writers can spell a bottom in the near-term. We may very well get that, but a follow-through day is needed for confirmation. While we do have some leadership in this market it still remains too thin to think we have a new bull on our hands.
Think in terms of a time frame. If you are able to trade in terms of days and weeks, then a short-term rally is tradable for you. If you have a longer-term time frame a brief week or two rally won’t wet your appetite. Have a clear plan of attack for this market rather than shooting from the hip. You’ll end up shooting yourself in the foot.
Short-term, a rally here is not out of the question. As always, have a CUT LOSS strategy. If your trade goes against you do not fight the tape. Get out and live another day.