Markets Rally Broadly, But Volume is Lackluster
"From The Trading Desk" May 2, 2007: The markets rallied broadly but on lower volume. The NASDAQ was up 1.04% on less volume and recouped the prior three day's losses. The S&P500 was up .65% to a new high, recouping the prior losses as well. Volume was also lighter.
The DOW continued its run to another new high but it was tempered by lower volume. CROX was up 4.7% on strong volume. VIP was up 5.25% on good volume. ROCM fell even more after it's huge collapse in prior days. CTSH failed to rally above it's 50-dma.
"Current Market Pulse":The market is in a confirmed rally. Although things are looking good today, caution is still advised. We are at lofty short-term levels and lesser-quality names are leading the rally. I am recommending caution. Sell your weaker acting stocks. Come off margin. Buy only the best CAN SLIM stocks like the ones we suggest. Only buy stocks that are emerging out of a solid and proper basing pattern on big volume. See our "Buy" list for candidates. Always cut your losses at 7%-8% below your purchase price No Matter What.
"Market-Leaders" Moving-Up on Volume: VOCS, RTI, CBG
"Market-Leaders" Moving-Down on Volume: ROCM, HWCC, CTSH, GRMN
"How To Spot Market Tops" - When the "big boys" (institutional investors like mutual funds, banks, pension funds, insurance companies, etc) head for the exits, you need to as well.
They control an estimated 80% of the price action of the US stock market, so it pays to know what they are doing. Since they are so big, they leave tracks behind. By keeping a close watch on the markets you can step aside and not have to "ride" the markets down during their "gut-wrenching" declines of 15%, 25%, 50% and more.
The best way to gauge if the institutional players are exiting the market is to watch what for we call "distribution days." Simply, this is when one of the major indexes ( the NASDAQ, S&P 500, Dow Industrials, NYSE Composite) is down more than .2% on heavier volume than the previous session.
Not all indexes have to fall at the same time. If only one of the gauges suffers heavy distribution that still can signal trouble ahead.
When the market racks up four of five of these in a few weeks time, chances are the rally is in trouble and the market may reverse lower.
Above is a chart of the NASDAQ in 2000 as it peaked on March 10th and then started it's massive decline. The first day of heavy distribution came 3 sessions prior to the peak. The index fell for several sessions putting in another distribution day, then tried to rally back.
They control an estimated 80% of the price action of the US stock market, so it pays to know what they are doing. Since they are so big, they leave tracks behind. By keeping a close watch on the markets you can step aside and not have to "ride" the markets down during their "gut-wrenching" declines of 15%, 25%, 50% and more.
The best way to gauge if the institutional players are exiting the market is to watch what for we call "distribution days." Simply, this is when one of the major indexes ( the NASDAQ, S&P 500, Dow Industrials, NYSE Composite) is down more than .2% on heavier volume than the previous session.
Not all indexes have to fall at the same time. If only one of the gauges suffers heavy distribution that still can signal trouble ahead.
When the market racks up four of five of these in a few weeks time, chances are the rally is in trouble and the market may reverse lower.
Above is a chart of the NASDAQ in 2000 as it peaked on March 10th and then started it's massive decline. The first day of heavy distribution came 3 sessions prior to the peak. The index fell for several sessions putting in another distribution day, then tried to rally back.
That rally stalled in late March and then the NASDAQ racked-up three days of heavy distribution in a row. A definite signal to exit the markets. The index also sliced through it's 50 day moving average on heavy volume, another major sell signal.
The NASDAQ put in a total of 9 distribution days in a month's time. During all this, scores of market "pundits" were telling investors to "buy the dips." Many individuals who did not heed the real warning signs lost a lot of money and those who stayed on margin were most likely wiped out. This ended up being one of the biggest collapses in Wall St. history.
Don't panic if the market flashes a few distribution days from time to time. The market can't go higher without taking an occasional breather now and then. It's when they pile up in a very short time that you need to worry.
Also, not every distribution day should cause you concern. Higher volume selling after a holiday usually means that more people are now back after a quiet pre-holiday period.
"Churning" near the top is also a sign of distribution. This is when the market is not advancing near the top but the volume is brisk. This means that there is a lot of institutional trading going on, but the buyers' demand is not strong enough to push prices up.
When you see heavy distribution in the markets you must act quickly. If you are on margin, get off! Sell your weaker acting stocks. If selling persists, raise cash to protect your hard earned assets. Don't listen to the experts, listen to the markets.
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We don't issue lots of stock-picks like the others. But the ones we do are Powerful Stocks that have the potential for gains of 50%-100%, 500% and more.
Sure, our stocks have huge earnings, showing tremendous recent strength, and are being accumulated by the top money managers on Wall St. But it's not enough just knowing their names. You have to know how to trade them. When to buy them and when to sell. Since the average high-growth stock eventually goes down over 70%, this knowledge is valuable. Sign-up today for your FREE TRIAL
Good trading is all about having solid and proven trading rules like the ones I use every day. Rules developed by the world's best traders like William J. O'Neil and Jesse Livermore. You can read more about them here:
THE TOP 12 RULES OF INVESTING You Need To Know
THE TOP 12 RULES OF INVESTING You Need To Know
Happy Trading,
Mark Gordon
GOLDENTICKER.COM
" Past performance does not guarantee future results. Investing in stocks, bonds, ETFs, and mutual funds involves risk and loss of capital can occur. Consult with your financial advisor before investing in the stock market or making any investment decisions. This blog/website is solely for informational purposes and is not an offer to buy or sell or solicitation of an offer to buy or sell any security or investment product. This material is not to be construed as providing investment services in any jurisdiction where such offers or solicitation would be illegal.
Mark Gordon
GOLDENTICKER.COM
" Past performance does not guarantee future results. Investing in stocks, bonds, ETFs, and mutual funds involves risk and loss of capital can occur. Consult with your financial advisor before investing in the stock market or making any investment decisions. This blog/website is solely for informational purposes and is not an offer to buy or sell or solicitation of an offer to buy or sell any security or investment product. This material is not to be construed as providing investment services in any jurisdiction where such offers or solicitation would be illegal.
