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Elvis has Left the Building; Volume Flees Again!

|Includes: AAPL, DIA, EDC, EDZ, Alphabet Inc. (GOOG), QQQ, SPY, SQQQ, TECL, TECS, TNA, TZA

The low volume rally continues as volume on the S&P 500 registered lower than Wednesday’s level and lower than Monday’s holiday volume. Finishing the day near the highs of the session was the NASDAQ boosted by GOOG and AAPL stock. GOOG reported stellar earnings after-the-bell pushing the stock more than 6%. On the other hand, JPM stock dropped as the market voted against the stock. The real story of the day was the lack of volume suggesting institutional players continue to sit on the sidelines. This market can continue pushing higher, but without the help of leadership and institutions the rally will not last long.

Next week will usher in volume as it will be option expiry week. On balance the 3rd week of the month brings on volatility and volume as option players position themselves for expiration. This market continues to wedge higher leading us to believe whatever upside is left is VERY limited and any volume selling will absolutely ROCK this market hard. If you think August was bad, this selling could be worse. There is always a chance for us to never look back and you need to be able to cut your losses and push forward.

There is a big to do over sentiment. The Investor Inteligence survey shows bears are ruling the roost and by a wider margin week over week. However, the AAII survey shows a complete opposite story. Bulls outnumber bears 39% to 36%. Bulls have gained 4 straight weeks in a row in the AAII survey. Despite the bearish tint at the recent lows the spread between bulls and bears was NOT at extremes seen at other major lows. Does this guarantee us anything? It does not guarantee anything, but it does put the current rally into context.

If you are new to this game, it is best to stay in cash. Shorting takes exceptional skill and if you haven’t made money on the long side your focus should be learning how to invest on the long side first! Once you have gone through a few uptrends and make money then you can test shorting the market. As always, it is best to always cut your losses SHORT!

Stay classy!