Dow & Nasdaq Jump Above 50 DMA Line; Where’s The Volume?

ByAdam Sarhan

Wednesday marked Day 3 of the current rally attempt which means that as long as Monday’s lows are not breached the earliest a proper follow-through-day (FTD) could emerge will be this Thursday. In order for a proper FTD to emerge one would have to see at least one of the major averages rally at least +1.7% on higher volume than the prior session as a new batch of high ranked leaders trigger fresh technical buy signals. Once that occurs, then the current rally attempt will be confirmed and the ideal window for accumulating high ranked stocks will be open. However, if Monday’s lows are breached, then the day count will be reset. Trade accordingly.

Stocks Encounter Resistance Near 50 DMA Line

ByAdam Sarhan

Tuesday marked Day 2 of the current rally attempt which means that as long as Monday’s lows are not breached the earliest a proper FTD could emerge will be this Thursday. However, if Monday’s lows are breached, then the day count will be reset. Taking the appropriate action on a case-by-case basis with your stocks prompts investors to raise cash when any holdings get into trouble. Trade accordingly.

Stocks Soar On EU Bailout

ByAdam Sarhan

The technical action in global equity markets is not promising. At this point, several European stock market’s have fallen over -20% from their 52-week highs which technically defines a bear market. The major US averages are all trading below their respective 50 DMA lines which is not healthy. It was also disconcerting to see volume dry up on Monday as the major averages “bounced” from egregiously oversold levels, which usually suggests massive short covering, not new buying efforts. A host of leading stocks closed near their lows after a very strong open which is a subtle, yet important, sign of distribution. However, if this market resolves itself and wants to go higher, we will need to see a proper follow-through day (FTD) emerge before a new rally can be confirmed. Monday marked Day 1 of a new rally attempt which means that as long as Monday’s lows are not breached the earliest a possible FTD could emerge will be Thursday (Day 4). In addition, if Monday’s lows are breached then the day count will be reset. Taking the appropriate action on a case-by-case basis with your stocks prompts investors to raise cash when any holdings start getting into trouble. Trade accordingly.

Stocks Plunge As Contagion Fears Spread

ByAdam Sarhan

The market is currently in a correction which, according to historical precedent, suggests 3 out of 4 stocks will follow the market lower until a new follow-through day emerges. That said, taking the appropriate action on a case-by-case basis with your stocks prompts investors to raise cash when any holdings start getting in trouble. It is also important to note that the major averages have experienced multiple “corrections” since the March 2009 lows and each one has been mild at best (less than a -10% decline from the recent high). Therefore, it will be very interesting to see how low this correction goes before the bulls show up and defend support (if that happens).

Additionally, it is important to note that the market can go much lower (or higher) than anyone thinks; so it is of the utmost importance to filter out the “noise” and carefully analyze price and volume for the best read on the health of the market.