Market Notes (11/12/09)

• Posted by Joe Fahmy
• on November 12th, 2009

As I mentioned in yesterday's Market Notes, the low volume rally of the past 7 days was concerning. For this recent uptrend to have any sustainability, large institutions need to participate. So far, they seem to be on the sidelines.

Although Thursday's volume on the NASDAQ was higher than Wednesday's (thus making Thursday a distribution day), I do find some positive signs: 1) The volume was still below average. 2) The volume was skewed by the over 224 million shares that traded in $COMS (due to its buyout). 3) Many of the Big Caps continue to hold up well and consolidated today on light volume: $AAPL $AMZN $BIDU $GOOG $PCLN $ISRG.

Other stocks on my watch list that survived Thursday include: $ARST $CRM $CREE $IOC $SXCI $NFLX $DGW. If you look at these charts, you will notice that they all pulled back on light volume, a sign that institutions are not dumping their shares. I always like to pay attention to the stocks that hold up well on down days because they are usually the first to make new highs when the market resumes its uptrend.

Right now, I continue to recommend caution. I don't suggest making any new purchases until we see more upside volume come into this market. Another thing that troubles me is the narrowing leadership. It seems as if the strong action in the Big Cap stocks is masking the overall weakness in the market. This can especially be seen when looking at the divergence between the NASDAQ 100 (which made new highs today) and the Russell 2000 (which is struggling to regain its 50-day moving average). My best advice is to raise some cash or keep trading positions light until the market gives us a clearer picture.

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Tickers: AAPL, AMZN, ARST, BIDU, COMS, CREE, CRM, DGW, GOOG, IOC, ISRG, NFLX, PCLN, SXCI

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