Before You Get Excited About This Rally, Consider This

  • March 25, 2004
  • Tim Truebenbach

Today’s
rally looked pretty solid on the surface
but left a bit to be desired in terms of volume.

image src=”https://tradingmarkets.com/media/2004/Tim/tt032504-01.gif” />

image src=”https://tradingmarkets.com/media/2004/Tim/tt032504-02.gif” />

NYSE volume came in lighter
than yesterday and below average. Preliminary numbers indicate Nasdaq volume
may have slightly exceeded yesterday’s volume, but not by much. It also
came in below average. There was short-covering going on and that may have been
about it because even though the Naz managed to finish up 3% in one day, volume
sure wasn’t that impressive.

^next^

Growth stocks acted weak
as well. Netflix
(
NFLX |
Quote |
Chart |
News |
PowerRating) bounced
back but volume was extremely light.

image src=”https://tradingmarkets.com/media/2004/Tim/tt032504-03.gif” />

Aeropostale

(
ARO |
Quote |
Chart |
News |
PowerRating) acted the same way…

image src=”https://tradingmarkets.com/media/2004/Tim/tt032504-04.gif” />

Yahoo!

(
YHOO |
Quote |
Chart |
News |
PowerRating) turned in a great price showing as it rallied almost 6%, but volume
came in below average

image src=”https://tradingmarkets.com/media/2004/Tim/tt032504-05.gif” />

Dick’s
Sporting Goods
(
DKS |
Quote |
Chart |
News |
PowerRating) acted just the way I would like to
see. Unfortunately, it was not the norm. The stock pushed strongly above its
50-day moving average as volume came in well-above-average.

image src=”https://tradingmarkets.com/media/2004/Tim/tt032504-06.gif” />

If the market is about to
end this correction and start moving higher again, it will most likely produce
a nice, large rally on HEAVIER volume. This volume
will also most likely come in above average. The correction began in late-January
as the market was rallying on light volume and declining on heavy volume. If
this doesn’t change, neither will the market’s direction.

In the meantime, strength
(such as DKS) is easy to see against a weak backdrop. I will continuously be
posting and talking about new names on my
service as I see them. In the meantime, enjoy your weekend and the downtime!

Until next Tuesday,

Tim Truebenbach

timt@tradingmarkets.com

P.S. Rallies like today
are why I always say shorting can be tough–because short squeezes can
be quick and fierce even though they don’t usually last long!