Range Bound Market

While the markets continue to be range bound I took a vacation last week and spent the week up north enjoying the nature.  Markets rallied in the last two trading sessions.  There seem to be a moderate buying activity in the last two days.  However, without a breadth thrust the whipsaw action of the market continues to frustrate the buyers.  Markets are in a channel and in a holding pattern.  Play support and resistance zones and play small.  Do not let small losses get out of hand.

Suspect Rally

Futures are down big today.  Rallies on low breadth are always suspect.  It will be interesting to see how the breadth numbers would turn out today by end of day.  If this market sells off on huge breadth all bets are off.

Tech sector waking up

Finally, it is good to see the Tech sector as a leading sector today aided by beaten down stocks making huge moves.  The past few days the trading sessions have been sleepy.  Breadth continues to be lower in this rally.  But low breadth has been the characteristic of this Market whether it goes up or down.  The Market is also taking all negative news in stride and holding up well.  The Market has not convinced me to go all out investing or trading.  Just a few nuggets here and there.  Trade cautiously and manage risk appropriately.

Technical Bounce on Friday July 13th

Markets bounced hard after a series of down days.  However, breadth did not support the big upside move.  On the other hand, despite all the negative news Market has held up very well.  I need to see upside moves supported by a large number of stocks participating in the move.

Whipsaw Market - Sit and Wait it out

Dow and SP500 are down 6 days in a row.  It has been a very gradual sell off for stocks.  The only thing that would keep this Market up would be the hope of QE which doesn't appear to be coming anytime soon. Right now this is a traders only market.  Just sit and wait out the whipsaws.

Lack of conviction on Buy side

The markets have stalled since making a huge move to the upside with breadth thrust on June 29th.  Follow through buying is lacking.   Lack of selling is also part of the problem.  What this means is we are probably range bound.   Earnings season is upon us which is not helping either due to lowered expectations of earnings.  My breadth indicators point to a gradual improvement in breadth not due to aggressive buying but due to lack of selling.  If I see huge buying like we've seen on june 29th I would probably put some cash into play.

Market action review for Fri July 06th

Dow and S&P500 fell nearly one percent while nasdaq was down 1.3% on Friday July 6th.  The disappointing jobs report which came out on friday seem to trigger the loss.  However, the underlying breadth did not support the down move.  The markets seemingly are digesting the gains acquired from last couple of weeks.  We are heading into earnings season this week from a light trading week which could provide some sort of catalyst for the market to launch higher as long as we do not see a huge sell off.

Markets can remain overbought

Markets have been holding up well since last Friday's buying spree.  In fact they are now quickly approaching or at overbought levels.  Expect some sort of consolidation of gains in the near term.  Trading is also light this week due to 4th of July holiday here in the US.  Markets can also remain overbought for some time and that is when best gains are made if you are in the right vehicle.

Friday 06/29 - Broad based buying lifts Markets

Friday turned out to be a huge gap up day.  Nasdaq was up 3%, S&P500 2.49% and Dow 2.2%.  Markets held on to gains from the opening and even pushed ahead for a strong close.  Markets digested all the bad news from euro zone and remained resilient in the last few weeks.  Odds of success in buying stocks becomes significantly higher after a strong upside breadth thrust like the one witnessed on Friday.  On the image above blue spikes represent buying pressure and the red spike represent selling pressure.  As you can see, Friday was a strong buying pressure for the year.  The next logical move for this market would be a pullback to digest the huge gains and set up for another move to the upside.  I need to see more of this buying binge to continue for this rally to last for sometime.  At this stage I would bet on 50% invested in stocks showing high relative strength and emerging out of bases.