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Dow Jones Leads the Market Higher as Volume Surges

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NASDAQ undercuts low, marks day one of a new rally attempt


Volatility rules the day as the NASDAQ triggers a new correction while the S&P 500 and Dow Jones Industrial Average signal day one of a new attempted rally.  February lows were insight for all of the indexes, while the NASDAQ undercut its most recent low the S&P 500 was able to hold above it.  Volume poured into the NYSE as well as the NASDAQ, but failed to lift the NASDAQ into positive territory.  More importantly, the last remaining leaders from February's uptrend were hit today and failed to recapture positive territory.  The market remains on shaky ground as cash remains king.

Last week I spoke about the lack of power the last follow-through day had.  Volume came in higher, but only by a last minute surge in volume.  During powerful follow-through days you are witnessed to volume pouring in throughout much of the day.  Sadly, we didn't get it.  Not too mention the sloppy nature of the market was a dead give away we needed more time for this correction from the April highs to work itself out.  Many folks are now used to 3-4 week pullbacks since we rallied off the March lows and aren't accustomed to a longer correction.  While 1040 on the S&P 500 may hold over in the long run the market still appears to be a ways away from setting a strong new uptrend.

Volume support was a positive sign today it showed buyers made a stand for stocks at the lows.  An impressive sign, but it wasn't the NASDAQ or Russell 2000 stocks that showed the strength.  It was the Dow Jones Industrial Average that came out on top.  Not a terribly good sign for this new rally attempt to last.  Now, we could certainly see the NASDAQ take over here and move higher then we'll adjust.  For now, we'll wait patiently stalking our prey and wait for the proper moment to take advantage of a new rally if it happens.

If over the next few days the market can actually quiet down and trade within a tight range that would be the ideal action.  In July of 2009 and February 2010 we saw the indexes put in nice tight action prior to new uptrend is confirmed.  Just as important we'll need to see some strong leadership emerge.  However, the stocks that moved higher last week didn't budge today.  There were a few stocks bouncing off the 50dma nicely, but without a confirmed uptrend these stocks are inherently more risky.

Many will believe it is best to day trade and take advantage of it, but many will simply lose money or walk away even.  Cash remains king and waiting patiently for the proper moment will reap you great rewards.


Disclosure: No Positions