SUMMARY:
- Another low volume Monday rally.
- NY Empire manufacturing report weak again.
- Foreign investors pushing less money into US investments.
- Are commodities indices falling in line with other markets pointing to slower growth?
- Back into the consolidation, but no one really believed in Monday.
- Prices are the focus this week with PPI Tuesday and CPI Wednesday.
Low volume rebound takes pressure off without another deeper test.
Some more selling would have suited the market better and that is what we were looking for, but just as the prior Monday, stocks answered Thursday and Friday selling with a lower volume bounce. Pretty impressive price gains averaging right at 1% with the small cap SP600 leading with a 1.7% gain. The buyers were obviously in charge of the day, but there just weren't that many of them. Volume was well off the Friday pace and well below average. It was a day where the downtrodden rallied and grabbed some air, but overall quality moves were pretty scarce.
There were positives. Breadth was strong on NYSE (2.5:1) as the small caps rebounded and led the market along with the mid-caps. They too, however, are simply bouncing from a pretty good flogging. SP500 made a higher low in its ongoing attempt to make a higher high since peaking in March. It recaptured the neckline to its head and shoulders pattern, but it lacked any buying conviction. NASDAQ rallied through the top of its recent range as well, rising to the 200 day SMA. Nice, but also no volume.
As with the close two Mondays back, NASDAQ and many stocks are poised to make the next move higher. The NYSE indices are trying to make a higher low, coming back from some pretty rough selling. There is promise, but the volume tarnishes the prospects ahead with another potential round of selling into the rebound just as happened last week. These low volume bounces can work to prime the upside pump, but most of the time they are just part of the basing process and often lead to further retrenchment.
In sum it was a good recovery in terms of price, keeping SP500 alive. It was not the move that would have really helped the market, i.e., a further sell off and a volume rebound. This could turn into something better, and there were some decent moves to nibble at Monday. For now it the indices are still trying to form the bottom on this selling and a low volume bounce in response to higher volume selling is typically not what bottoms are made of. |
