Volume Fades As Stocks Close Out October

Price action was something stock market participants can be excited about.  We rose off the most recent lows and confirmed the rally with a move in the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) by more than 1.7% gains on higher volume than the previous day.  However, that Tuesday rally was the only day stocks showed accumulation.  The rest of the week saw stock gains on lower and lower volume suggesting the move higher was not being bought by the big institutional players.  Starting on Wednesday, the market saw the amount of Calls being bought slow into the end of the week.  Overall, the market looks weak at best and without volume confirming price action this confirmed rally has very little chance to succeed.

With all the negativity surrounding the market, there are a few charts beginning to pop up onto my radar.  Nothing I am buying just yet, but there are some that are showing up.   It is premature to think these will be our leadership but it is something to keep your eye on.  Here is the list:

• ALGT
• AXYS
• AFAM
• SHEN
• ISYS
• NL
• VASC

Although I do not have any positions on at the moment, these are looking to form the charts that are needed to go long.

Even with these charts looking like longs there are plenty that could still be shorted.  I will not get into these shorts as I do not short stocks myself.  However, it is the big name tech stocks that look primed and ready to make another plunge lower.

I do believe we are going to see at least one more break below the prior lows before heading higher.  The market hasn’t shown enough strength to push into a new bull market phase.  It could take years but even a small sustained rally needs better price and volume action.  At the moment we are seeing weak moves off the lows with very little support.  We need the big institutional support to move us higher.  Tread carefully, make sure you keep those losses small.

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