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


Wednesday, May 12, 2010
Stock Market Commentary:

The major averages jumped, extending a week long rally after a flurry of healthy headlines from Europe were released. Volume totals were reported lower on the Nasdaq and on the NYSE compared to Tuesday’s totals which was a bit disconcerting. Advancers led decliners by a 5-to-1 ratio on the NYSE and by a 4-to-1 ratio on the Nasdaq exchange.  New 52-week highs outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange. There were 25 high-ranked companies from the Leaders List that made a new 52-week high and appeared on the BreakOuts Page, higher than the 19 issues that appeared on the prior session. Waning leadership has been evidenced by the recent lack of stocks making new highs as the rally came under pressure.

Contagion Fears Ease:

Several positive headlines were released from Europe which helped ease contagion woes. The Portuguese bond sale went better than expected, planned budget cuts in Spain and the U.K. went well and EU GDP topped estimates. The EU’s statistics office in Luxembourg said that gross domestic product in the 16 euro nations climbed +0.2% from the fourth quarter, when it remained unchanged. In addition, Germany’s economy unexpectedly grew in the first quarter, helped by rising exports. Interestingly, the news sent US Treasuries and the euro lower as gold and the dollar rose. Gold surged to a fresh record high even as the dollar rallied and the euro flirted with a fresh 2010 low.  

Technicals Are Improving; But Where’s The Volume?

Technically, it was encouraging to see the Dow Jones Industrial Average and the tech-heavy Nasdaq composite close above their respective 50 DMA lines for the first time since violating those levels late last week. The benchmark S&P 500 closed near its intraday high but just shy of its 50 DMA line. The primary concern at this point is that volume continues to recede compared to last week’s levels which is not ideal. Normally, one would like to see volume recede as the market declines and expand as the market rallies, which is the exact opposite of what is happening now. Only time will tell if this is a short lived correction or the start of something more ominous.   

Market Action- In A Correction; Day 3 Of Current Rally Attempt:

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.

Professional Money Management Services- Free Portfolio Review:
If your portfolio is greater than $250,000 and you would like a free portfolio review, 
Click Here to get connected with one of our portfolio managers. ** Serious inquires only, please.


Here are more articles you may like

Claim Your Free Guide Today

Give us your email and we will give you the tools to change your life. 


Learn about Early Entry Points & much more...

© ChartYourTrade | Contact us:

Disclaimer: All communication from ChartYourTrade is general in nature and for educational and general informational purposes only. Under no circumstance should it be considered personalized investment advice. All our work is general in nature and not specific to any one person. All the information on this site and/or that originates from us, or any of our partners or affiliates, is for educational and informational purposes only and is NOT a recommendation to buy or sell anything. To avoid any conflicts of interest, we do not have a working relationship with any of the companies mentioned in our work. Furthermore, we may have a long, short, or no position in any, or all, of the names that appear in our work and they may change at any time without notice. Investing and trading in capital markets or using margin carries a high level of risk and may not be suitable for all investors. Leverage can work against you as well as for you. Before you decide to invest or trade in capital markets you should carefully consider your investment objectives, level of experience, and risk appetite, among other factors. The possibility exists that you could sustain a loss of some, all, or more of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with capital markets, investing/trading, and seek specific investment advice from an independent financial advisor and other professionals. Remember all the information we provide is for educational and general informational purposes only and is subject to change without notice.

Charts and Data are courtesy of MarketSmith Incorporated. Join MarketSmith here.

Terms of Service