Online Stock Trading | Stocks Soar; July 2002 Repeat?

Stocks Soar; July 2002 Repeat?


Filed Under Market Commentary |

Fueled by the FOMC 75bps cuts and expectations that further cuts are on their way Traders sent stocks higher on Tuesday.  Marking it the second straight Tuesday the Dow Jones Industrial Average had gained more than 400 points.  Flash back to July 2002 where the Dow flashed two 400pt rallies in the face of the 2nd worse stock market decline in history.  Ultimately, after rallying for a few weeks the market rolled over and set new lows.  Will the same occur this time around, isn’t this time different?  More than likely not.

New Lows again outpaced New Highs and the VIX index dropped like a ton of bricks.  Put/Call even dropped below 1 for the first time in awhile.  Is this the type of action that sets us up for a new bull market, mind you after a 5 month downturn after a 5 year bull run?  Nope!  Small banks, Commodity stocks, and Railroads are all leading this market at the moment.  Not your typical Bull Market leadership.  In fact, they are your Bear Market leaders.  Today, the beaten up Mortgage and Brokers lead the indexes higher.  Both groups who have been severely beaten up, not your ideal leadership group.  It will take YEARS for these groups to rebound.

Do not feel like you missed out on yesterday’s rally, you didn’t miss anything.  Unless you are super lucky and can pick short-term blips in the market.  However, 99.999999% of market participants can not.   The longer term trend is still DOWN  and the only short term uptrend is the Dow Jones Industrial Average.

Volume on the NYSE was down and the volume (according to Bloomberg and IBD) on the NASDAQ was down some  1% from Monday’s trade.  Where is the volume?  Where is the conviction by the bulls?  Simply put, there isn’t any conviction from the bull camp.  Housing remains on the forefront of negative news and with falling home prices and the level of foreclosures rising the headwinds of this market are not calming down.

Cash is King!

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