Month-End Provides the Market with Volitility

It was another story of the morning pop being sold and the market finding support.  Even with a positive revision to the second quarter GDP traders chose to focus on a negative report from Chicago’ Purchasing Managers.  Stocks were sold off in panic fashion, volume was running higher suggesting institutions were selling stock.  When it looked quite grim support rushed into the market showing buyers were willing to step up and accumulate shares.  Stocks struggled to keep their head above neutral finishing the day with a distribution with the exception of the NASDAQ.  Although the close was not great, but the major indexs were able to close above their mid-point of the day with accumulation underneath.

The Chicago Purchasing Manager’s report certainly shows hesitancy amongs the group highlighting the fear about the economy.  Remember, stocks often price in future earnings and conditions.  I certainly do not see the economy expanding to levels where jobs would be created.  Keeping in mind the amount of liquidity coming into the market from the Federal Reserve is rising the water by which all stocks float.  In essance, we can thank helicopter Ben and the US Treasury for pumping in massive amounts of liquidity.

Volume was interesting to watch as the day progressed.  The NYSE can thank CIT for trading over 561mm shares accounting for the lion share of its volume.  Over on the NASDAQ volume was running roughly 7% higher as stocks were being sold.  As the market found support volume began to run higher.  It appeared institutions stepped up and were accumulating shares at a rapid pace.  Volume on the NASDAQ shot up and was running 14% by noon time as stocks were enjoying an excellent intraday session.  By the end of the day stocks didn’t end as strong as you’d like but it was important to see the surge of buying as stocks fell.

Three hundred words later I have to mention leading growth stocks.  Like the major indexes leading stocks enjoyed a bit of wild action, but the support was much stronger in the leading stocks than the broader market.  Again, my first concern is with leading stocks followed by the major indexes.  Taking a clue from leading stocks is we have the makings for leading stocks to make runs.  Today, we have seen a few continue to tack on very nice gains.

Although it may appear this market is heading for a top, our leading stocks are suggeseting another scenario.  It appears a rotation out of lower quality names into our leading stocks continues to take place.  Although the S&P 500 has 4 distribution days there is only one heavy day of distribution.  Over on the NASDAQ with one heavy distribution day and another minor one there isn’t too much to be worried about here.  Remember, cutting losses always protects yourself to the downside.