US Stocks Get Intraday Support But Volume Slacks

Stocks were set to fall apart Friday as the August Non-Farm Payroll numbers hit the street.  The “jobs” report that showed the unemployment rate rising to 6.1% caused traders to be somewhat fearful. However, VIX (^VIX) and put/call ratio failed to show any fear throughout the day.  It wasn’t until the tail end of the trading day did stocks catch a bid.  The NASDAQ (^IXIC) flirted with its highs of the day but crawled back into negative territory.  Friday’s action, price action was a good sign of support, but the lack of volume clearly shows lack of support by large institutions.  Quite simply, they are not buying this market.  Friday’s action relieved a bit of the oversold conditions from the week but it wasn’t able to reverse the negative trend.

Being a longer term investor, I do not worry too much about intraday and day-to-day movements of the stock market.  Through my own research, I have found picking short-term movements undercut my ability to grab incredible gains and limit drawdowns to my account.  Jesse Livermore traded in the bucket shops for ultra-short term movements and found holding for the longer term was a more fruitful adventure.  What many do not realize is the amount of leverage Mr. Livermore had available to him to take advantage of short-term movements.  Sometimes he had 100% margin, 20 to 1 margin which is simply unreal.  When you have that type of margin, day trading can reward you handsomely. However, through his maturation, he found the short-term trading to be inferior to holding longer term.  In this market, Jesse Livermore would most likely be in Europe vacationing and paying very little attention to what was going on in the market.  This is exactly what I am doing, keeping on the sidelines and waiting for the right opportunity.

This market will most certainly test the lows set back in July.  There is talk about Freddie Mac (FRE) and Fannie Mae (FNM) will be bailed out by the government over this weekend.  However, it looks like the shareholders will be diluted.  I wouldn’t be surprised if the Treasury will be issued equity in the deal to be sold to the open market later.  With that said, the market isn’t healthy and continues to warrant staying away until the storm clouds pass by.

Enjoy your weekend.

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