What a beautiful day on Wall St. Today. The sun was shining, the wind was blowing, and the market took off like a rocket from Cape Canaveral.
After yesterday's major distribution day on the NASDAQ, doubt was starting to cast in if the NASDAQ was going to be able to pull itself out of this congestion to the upside. The market opened higher on high volume, proceeded to move higher after Greenspan's comments, but reversed course and headed lower to close down for the day on heavy volume. The only saving grace, again, was the breadth, which was positive on the NYSE, and slightly negative on the NASDAQ, suggesting underlying strength. As has been the case since the bottom in May, the market was being supported by small and mid cap stocks, while, unfortunately for the heavy weighting, the large caps were putting pressure on the indexes.
On Wednesday, volume and price increased on all 3 major indexes from the prior day, logging a day of accumulation. New high's and up volume significantly outpaced new low's and down volume.
The NASDAQ cracked it's 50% retracement area with a vengeance, which we needed to do to clear the skies for take off. Next destination, 4,500.
The question now is, can we follow through with price and volume tomorrow or Friday. Don't be surprised if the market takes a breather or pulls back, hopefully on lower volume. If the NASDAQ acts well, and Friday's economic numbers are favorable, 4,500 may come quicker then we all think. But don't forget, there still is a downside. And the market can just decide to show us what the basement looks like.
Friday's economic release's are going to be critical, and will set the markets mood for the rest of the month. The PPI, capacity utilization, and retail sales are scheduled to be released in the morning. The markets comfort with the soft landing scenario could spell trouble if there are any signs of a pick-up in strength or inflation.
Earnings season is in full swing, and there is no reason to expect anything but strong reports. Unlike the last earnings season, the market is set to rally and take every stock that reports good earnings higher with it. But don't be the company that disappoints, or you know the drill, off with the head!!! Even as expected earnings will receive a reception on the street. The cops busted up the party in March/April, and now we want to party again!!! Only the economic reports could change this mood.
Use tomorrow as a preparation day for Friday. Prepare two lists, stocks setting to breakout or breakdown. Come Friday, whip out the list that favors the direction of the market, and execute your plan.
If you have to remember anything, remember the following:
Cut you losses short. Let your winners run, not your losers.