Stocks End Mixed On Heavy Volume; Churning?

January 9, 2007

On a day where a strong IBD/TIPP poll shows that investors are gaining confidence and AAPL releases the new iPhone and Apple TV, stocks decided to churn one in today. The only exciting action came in the SP 600 which turned a 1.1% loss into a gain by the end of the day.

At the close, the Nasdaq rose .2%, the SP 600 gained .1%, and the DJIA and SP 500 both lost .1%. By just looking at the intraday action in the indexes it is obvious, with the volume, that today was pure churning.

Volume was higher on both the NYSE and the Nasdaq. This volume surge well above the 50 dma just solidifies the churning of the market.

The good news about this flat day is that once again stocks shook off early selling, found support, and then rallied into the close. Some indexes closed near the highs of the session. The rebound also came with more volume than the selling did today, adding another positive to today’s churn action.

However, all indexes are stuck in a trading range and are either consolidating or are about ready to breakdown. I am not sure which way this is going to go but I see new highs at 1/4 of the level they were in November, new lows expanding, less nice charts in my scans, less new longs working, and selling many stocks off. I have gone from 290 to 264 in stock holdings the past two and a half weeks.

If this market was strong and ready for more gains you would think I would be adding more longs than selling off longs. However, this rotation out of losers into winners is very smart. If the markets take off again I will be in the strong stocks ready to outperform the market; not the laggards which may not even rally if the market takes off.

If the market continues to close near the highs of the sessions in the upcoming days and finds support at the 50 dma I might start re-embracing this rally. But for now I have caution flags everywhere that will make me cautious until I start getting more HOT charts up on my scans.

But with the Nasdaq only having two distribution days in the past four weeks, it is not smart to jump the gun on the short side. I am still very long and hope to remain that way.

It is time for 4th quarter earnings. This is sure to bring even more surprises and misses like always. Enjoy the volatility caused by SarbOx.

Aloha and I will see you here in the chat room tomorrow.

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Posted by Joshua Hayes | Filed Under Free Commentary 

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