Market Alert - The Close

Where Friday held promise of new highs for the NYSE indices as the stock indices continued holding trends, Monday was a reminder of the 6 week lateral slog that preceded the increase in volatility the past two weeks. Six weeks consolidating the post-election run, a breakout, a rejection of the breakout, then a move to knock on the door of the highs once more. Monday was just another slow session in a market that tries to break higher but thus far, outside of SOX and NASDAQ, it is very similar to watching a slow motion move.

SP500 -4.86, -0.21%
NASDAQ -3.22, -0.06%
DJ30 -19.04, -0.09%
SP400 -0.45%
RUTX -0.81%
SOX 0.35%

VOLUME: NYSE -9.5%, NASDAQ -6%

A/D: NYSE -1.6:1, NASDAQ -1.7:1

Perhaps slow motion, but not without its merits. The indices fought off volatility and came right back to the prior higher highs. Moreover, the volatility hardly made for slow sessions. The litmus test remains the many quality stocks that boast good patterns and continue to make good moves, several showing their stuff on Monday.

Thus, while Monday was a lower price, slow motion day at least for the NYSE indices, the overall action continues the upside bias, more clearly evidenced by SOX putting in yet another higher high.

Indeed, SOX continues the trend up the 10 day EMA as NASDAQ does the same, though NASDAQ is finding it a bit harder to move through the late January peak as volume faded Friday and Monday as it bumped the late January all-time high.

The NYSE indices are all below the recent highs though modestly, as they took a breather after a solid Friday bounced them back to the threshold of new highs. Several stocks broke higher and we picked up some, e.g. BABA, SINA, INFI, MUX. Excellent moves for a flat market session, and something this market has shown, i.e. some areas moving well while others take some time off. The results have not been bad.

Of course there are still faults you can find with the move, and frankly they only are really faults because of the high bullish sentiment three of the past five weeks and the history of that indicator as a governor on market rallies and preceding market corrections. Sure the NSYE indices have to show they can still play after that breakout was rejected and they have yet to break back past the breakout level, but they did come right back after the sellers took their shot. Thus you either swear off playing the upside after that signal is out, or you participate with an eye on the door.

As noted before, sentiment indicators are not very good timing indicators, and therefore we prefer to enter positions when stocks show good moves and watch for when quality stocks start breaking. That can come in the form of breakouts that fail, breaks of trends that cannot recover -- basically a breakdown of those stocks leading the market higher. While oil struggled on the Monday session, there are not many areas breaking down, indeed, more are moving upside. Thus despite the high bullish sentiment, for now the market is still showing upside bias.
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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