Count On Price And Volume
It’s no surprise that the major averages
are trading with
heavier volume than yesterday, due to Veteran’s Day. The interesting thing to
watch will be how the indices close. Unless volume somehow dries up
significantly, we will either have a distribution day or accumulation day.
 
The market opened with buyers and has remained that way
most of the day. Obviously, it would be negative for the market to
reverse and close down on the day after trading positive.
If that
did happen, it would not do much for our outlook other than warrant caution
since there have not been any distribution days following the recent move.
The more pressing issue comes with the question: Where is
the leadership? The medical sector acted well for a time, but only
Forest
Labs
(
FRX |
Quote |
Chart |
News |
PowerRating) has been left standing. If it wasn’t obvious before, it should be
apparent now that FRX is the leader in this group. The problem lies within
finding a low-risk entry point to this stock since it broke through its
resistance before the mid-October follow-through day.
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The Internet sector has been attempting to lead us
higher, but there just aren’t very many stocks sitting off all-time highs to
do this. J2 Global
(
JCOM |
Quote |
Chart |
News |
PowerRating) has been pushing higher in a choppy fashion over
the past year, but its chart shows a chink in the armor after the hit and
close below the stock’s 50-day moving average it sustained yesterday. Today,
the stock has been unable to push back above this
trendline, and the group does not have many prospects except for
bouncers from the bottom.
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The computer sector has shown faint signs of leadership,
but there are still not that many stocks within the group that are in a
position to push higher without resistance. In the computer sector, it may be
a good idea to hone in on the security, manufacturers, memory devices and
services groups. They have been pushing into the upper quartile of the groups
in recent weeks.
Admittedly, it’s been tricky trying to predict the
market’s direction with all the global craziness that is going on out there
right now. Deflation and Iraq are two of the largest issues. My best answer
to that is one I will continue to follow because it has both made money and
allowed me to keep it, and that is to leave it to the price-and-volume action
of the market itself. These two simple indicators will tell much more than
trying to interpret and form opinions on complex and usually
unresolvable issues.
For now, the market appears to be under accumulation by
the big guys, so that is what we’ll follow. If stocks start breaking out and
let us in while they move higher, great! Otherwise, we’ll be relegated to the sidelines we have come to accept through
the bear market.
After a few more days of market action, we may have a few
more things to talk about on Thursday.
Until then,