Stocks rose with volume falling across the board as traders got back from a long weekend. It appears institutions weren’t interested in piling into stocks on Tuesday even as a government report should net inflows from foreign investors jumped more than expected. Price action was once again, solid from the start and finished strong as the NASDAQ and Russell 2000 closed on their highs of the day. We have witnessed a similar situation before much of the rallies in 2009 began as light volume affairs. As new highs were broken the market peeled off and corrected. It is possible we’ll repeat the scenario again, but in the meantime we are enjoying the positive price action.
The market may be approaching short-term overbought conditions as the number of stocks over their 20dma reached +60% today. While this may not appear to be extreme, we did just come off the lows where the percentage of stocks over the 20dma was just 20%. Now would be a good time for the market to take a breathier from its move off its recent lows.
The market is coughing up more new highs and new lows continue to be anemic. Only six new lows were witnessed on the NASDAQ and NYSE today. 287 new highs were made today and while this may seem low keep in mind the market is well off its highs from January. Ideally, we’ll see these numbers grow if the market continues to move higher.
The disturbing, or disappointment is we continue to lack the thrust we normally see during healthy uptrends. Our most recent selloff was riddled with distribution, the heavy kind. Major indexes still have yet to post an accumulation day, although February 5th was a day of significant accumulation. However, we have yet to see that power come back into the market. Until we see this power we’ll be resigned to what we have been witnessing from August to January.
The lack of volume certainly keeps us away from fully engaging our capital. We are seeing plenty of stocks forming proper bases, but still remain a ways from completing the bases. This can mean many different things, but it does point towards a positive where we failed to see proper bases and breakouts last year. We’ll remain patient and wait to see if the bases form where we can take advantage of the opportunities. Remember, anticipation is gambling and without proper base formation the likelihood the stock will run is diminished. Stay disciplined in this market.
