Monday, November 08, 2010

8 November 2010 One Bad Day A Bear Does Not Make


8 November 2010 One Bad Day A Bear Does Not Make

The market did close mixed today. I know most of you follow the DOW, so let’s take a quick peak. From the chart we can see the dip, BUT as we discussed last week, you have to look at the direction and the volume. Volume was below the 50 day average of 7.9 million as only 7 million shares were traded.

If we showed you a similar chart of the S & P 500, it too was below its 50 day average of 39 million 437 thousand shares and only hit a tad over 30 million shares.

So unless we see volume pick up to and above the 50 day average as the numbers go down, we should not be fearing an end to this rally. Again I would be looking for 4-5 of the last 7 trading sessions to be downward and at least average volume before we would consider this rally threatened.

Now what “tells” can we look for that might indicate that transformation is happening. For one, in the Journal today in the Money and Investing section Kelly Evans wrote the “Ahead of the Tape” column (This is a great column that occasionally gives great insight into what might be happening in the market in the next few days to come.) and it indicated that the retail investor is headed back into the market again. She sites the AAII (American Association of Individual Investors) Survey of market confidence and bullish sentiment is at a 3 year high and bulls are at a 4 year low. She also tells us the actual dollar flows as researched by EPFR Global is on the rise and in big numbers.

If you subscribe to the Buffet theory of “Be greedy when other are scared and scared when others are greedy.”, it might be time to watch the accumulation/distribution balance closely. 

From The "Behind His Back" White House Gallery
"I know He really thought he could not use his cell phone during take offs and landings."

Salve Lucrum


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