Thursday, March 20, 2014

Market Rallies But Volume and Leaders Lag Again

The market opened relatively unchanged and surged around ten o'clock on stronger then expected economic reports, closing near the highs of the day, but in well below average volume, continuing its recent pattern of low volume rally attempts after higher volume selling. Volume was once again at the lowest levels since the beginning the of year. Not exactly encouraging action.

Leading growth stocks continued their brutal pattern of lagging the market, but managed to maintain their consolidations without any serious damage. So while few stocks are able to make any progress, the chances of another trade able rally remains alive. Chipotle Mexican Grill (CMG) broke out to new fifty week highs, in above average volume, after bouncing off the twenty day moving average, while Chinese internet stocks SolarFun (SFUN), E-House Holdings (EJ), and Vipshop Holdings (VIPS) sold off in heavy volume.

Stocks on the short ideas list also continued to lag the market, but maintained their moving averages, setting up for another possible downward move. Coal stocks, Walter Energy (WLT), Alpha Natural Resources (ANR), and Peabody Energy (BTU), followed through to the downside off their respective ten day moving averages after Bank of America/Merril Lynch put out a cautious note on the group. Traders should review the short ideas list for stocks tightening into moving average readying to roll over. The shorter term trend favors a downside continuation.

The trading environment remains difficult. Considering the low volume rally attempt and stocks inability to make progress in either direction, traders should be close to cash with tight protective stops, especially on new positions. The odds favor the shorter term trend, which is down. Of course, odds are odds, and the market loves to defy the odds. With little damage among leading growth stocks, the market may just surprise us. Stay nimble and prepared over the next few days.


Taser International (TASR) is pulling back in an orderly fashion to its fifty day moving average and flat base breakout pivot point in light volume, despite choppy market action. A breakout above the recent trend line, could set the stock up for another run into new fifty two week highs.

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