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Stocks Take a Pause as Volume Slides Lower

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

Stock market leaders continue to act well as the market pulls back

The market took a rest today in front of tomorrow’s GDP report out along with jobless claims figures.  Volume ran lower across the board today as stocks digested Tuesday’s gains after the major indexes found support at their 10 day moving average.  Once again we saw strong action out of the market leaders.  Lower volume suggests institutions weren’t looking to dump stock on the market.  Today was a good day of consolidation ahead of important economic figures on Thursday morning.

 

All the rage on CNBC tomorrow morning will be when the government releases GDP figures as well as jobless claims.  Lots of points of views will be highlighted and debated, but there is one view we should pay attention to and that is the market’s reaction.  We aren’t taking it minute by minute or even second by second as many traders tend to view the world.  Again, we will need the whole picture with market reaction as well as our market leaders.

It may appear redundant to hear about the market leaders, but they really are the key to this market.  In late August as the market continued to move lower these leaders were holding up and creating bases.  A few were holding their pivot points and exploded higher with the September 1st follow-through day.  Since then these leadership group has expanded and we’ve see two more follow-through like days.  Ignoring the strength and trying to find reasons for the market to reverse much like Doug Kass and other market pundits will simply leave your portfolio bleeding.  Check your opinions at the door and follow the action.

A big complaint about the market is the volume and why it is low.  If we compare volume to the decline sure it is lower, but volume should only be compared day over day and relative to the 50dma.  During this month we have seen the NASDAQ’s volume flash above the 50dma showing accumulation.  The NASDAQ is the leading big boy index and when we see this index gain strength we pay attention.

The Russell 2000 made a significant achievement with the index clearing its June high.  Small caps have been winners in this market uptrend, but clearing June’s high the index is looking to recapture April’s high.  Continued strength would certainly signal bigger winners for us to take advantage of.

Do not let the market noise get into your trading and always cut your losses!