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Nice Late Day Rally But Distribution Days Are Piling Up

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

A lighter than expected durable goods figure didn't help out the market to begin the day. Sellers stepped up their operations just after the 10 o'clock hour. Intensifying just after 11 the selling continued pushing the market to the lows of the session. Volume jumped on the day but was below the 50 day moving average suggesting institutions didn't sell heavily. Late day buying did take the sting out of the early morning action, but was unable to save the market from a distribution day. Distribution has piled up on the S&P 500, so much so the market is under a yellow caution flag. The day's action certainly has us cautious.

A positive on the day was the NASDAQ was able to hold onto its 10 day moving average. I am not sure how much that says for this market after its incredible run over the last few months, but at least it's a positive on the day. Another striking aspect of this market is the spread between the NASDAQ's 50 and 200 day moving average. The last time the gap was this wide (to the upside) was last March and April when the market began to top out. By no means am I guessing we have topped, but it does appear a bit of rest for the market is not out of the question. Caution is the key here.

Perhaps another element to be cautious on is the jump in the Intelligent Investors survey of investment advisors. Bulls jumped back above 50% a clear sign bulls are back in control. Bears fell again and are very close to taking out the 20% level. The lack of bearishness in the market does not bode well for the market overall. Sentiment is a slippery slope to run up, use it as a secondary indicator. Bulls tend to be dominating this market and we'd rather be cautious.

Tomorrow's GDP report will certainly get the market excited. It appears the consensus is around 3%. How the market reacts and trades throughout the day will be a key sign for how we'll trade for the next few weeks. Weakness in the market will certainly foreshadow continued weakness. Enjoy the market fireworks tomorrow!

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.