There is no more controversy as stocks log big gains as volume rises. Stocks really got a jolt when the government released its monthly budget figures. The report showed the deficit was not as wide as expected giving stocks a boost. Volume rose throughout the day beginning the session showing a 50% change, but settled just below 30%. The market has once again has firmed up, but being up nearly 7% off the lows it’ll be important the market digests these gains properly. Another positive day for the market and we’ll move accordingly.
Earnings are on the front burner for this market. Monday’s reports were on the surface positive as Alcoa and C S X provided the market with positive outlooks. Alcoa especially as many analysts were looking for the stock to struggle in the third quarter. The company put those worries to rest and raised third quarter views. Both stocks traded much higher after hours, but sellers took over hitting the stocks hard. What appeared to be great starts to the day only ended up as an after thought as both stocks finished in a negative manner. Will this trend continue is the question.
Intel posted fabulous earnings and raising forecasts for the entire fiscal year. Intel’s CEO made a note they continue to see sustainable growth from the economy. Whether or not this comes true it is a positive the company sees positives in this economy. Futures at this juncture are reacting positively to the report and we’ll need to see the market sustain the higher prices.
Even with the potential big move tomorrow the market has moved into a short-term overbought scenario. Nothing that would ultimately would kill this rally, but should highlight the need for the market to take a rest and digest the gains. A favorable outcome would be for the market to consolidate the gains over a few days in lighter trade than we saw today. A few days of rest would go a long way to help those leading stocks to continue to out perform.
At this point, cash remains king, but this may be changing. We have more and more stocks lining up to become potential long targets it is hard to ignore this fact. If we see proper setups we’ll take advantage of the situation. Of course, a heavy volume reversal would put the brakes on this parade. As for now, we are going to begin operating on the long side. It isn’t the time to get super heavy on the long side, like I said previously we are up 7% off the lows in 8 days. Quite the v-shape move and these moves when successful will often experience a pullback. Tread carefully, even though we are up 7% doesn’t mean we have missed an overall uptrend. Stay patient and wait for stocks to give you proper signals.
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Disclosure: No Positions