Monday, May 14, 2007

A Grumpy Market

Even on a down day, Monday showed how difficult it's been for sellers to gain control of this market.

Composite volume picked up 12%, technically making this the second distribution day in three days. However, the market closed well off its lows and trade was below average. Not exactly decisive selling.

Market internals were horrendous yet again, and a look at the charts shows that the rally is weakening from the inside out. Not my favorite.

However, both the IBD100 and the TOF Ratio are showing no signs of imminent disaster. The IBD100 slipped in line at 0.5%, while breadth was actually better than the broader market. 40 of 100 stocks on the IBD100 moved higher, while just 27 stocks on the NDX posted gains. Also, the selling was pretty light, as just 16 stocks printed distribution days. Since IBD100 volume was so light on Friday, this makes today's sell stat particularly unimpressive.

Bottom line, the market action suggests it's not about the technicals -- it's about this week's economic data: Tuesday's CPI and manufacturing numbers, then the housing and employment reports later in the week. OE is another consideration, but OE volatility has been virtually non-existsent for a while. Charles Kirk quotes Jason Goepfert that 9 of the past 10 OE's have closed positively for the week (OE Friday closed higher than the preceding Friday).

The chart below looks weak, but not one stock I own saw heavy selling on Monday. As I mentioned on Saturday, the market is not in the mood for a strong CPI report. Should inflation come in a bit hot, expect fireworks to the downside.

I'm in the middle of deadline hell, so posting could be a bit erratic this week.

Until then, have a great evening.



Because of the calculation method, stochastics will likely fall to near 20 on Tuesday. However, all the sellers have to show for growing oversold is a 1.3% slide. The Composite has a rounded top, but for now it's only consolidation. The uptrend remains in tact, though by 8:31am tomorrow, it may be a different story.

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