Volume Lighter Than Friday; No FTD!

Monday, August 15, 2011
Stock Market Commentary:

Stocks enjoyed large gains on Monday but volume, a critical component of institutional sponsorship, was lower than Friday’s level which means a FTD did not occur.  However, the window remains open for a new FTD to emerge which will confirm the current rally attempt. Technically, as long as last Tuesday’s lows hold- there is a strong chance that the markets may be forming a short-term low. However, there is no rush to buy ahead of a FTD because doing so increases the odds of failure. To be clear, the bears remain in control of this market until the major averages close above their longer term 200 DMA lines or a new FTD emerges. A new follow-through day will emerge when at least one of the major averages rallies at least +1.8% on higher volume than the prior session. Until that happens, this is just a normal “oversold” bounce.

M&A News & EU Debt Woes Ease:

Before Monday’s open, some $19 billion of new M&A news was announced. One of the most popular was Google’s (GOOG) announcement that they planned to acquire Motorola Mobility Holdings (MMI) for $12.5 billion. The move helps Google compete with Apple and expand their popular Android platform. Over the past three days, the benchmark S&P 500 vaulted +6.5% which is its best 3-day gain since 2009. As previously mentioned, some of the largest moves (both “up” and “down”) occur during bears/weak markets.

Market Outlook- Market In A Correction

The latest action in the major averages suggests the market is back in a correction as all the major averages remain below key technical levels. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 200 DMA lines. If you are looking for specific help navigating this market, please contact us for more information.

 

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