What’s Wrong With This Rally
The
market is prime for a correction. We have seen solid distribution
since 9/5/03 and it has increased over the last week in the major indices. The
last two days saw the market rally, but it did not come on heavier volume. Lower-volume
rallies do not usually hold up too well when sellers appear.
Secondly, we are seeing
wide and loose action out many of the leading stocks. Four to 10-point swings
have been commonplace in stocks like Netease
(
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PowerRating).
Recent leader, United
Online
(
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PowerRating) has pierced its 50-day moving average on
heavy trade and remained below it.
This appears more like a
correction than the beginning of something more severe because of the solid
factors that are still in place. We are still seeing new daily, 52-week highs
outnumber new lows. The recent distribution has not come in an overwhelming
way. We’ll continue to watch the major averages’ price and volume
action and look for solid companies setting up in strong base structures. When
this occurs, it will be buying time again.
Have a great weekend,
timt@tradingmarkets.com