Thursday, September 30, 2010

Still In An Uptrend?

We finished the day with just some minor losses, but the intraday reversal after breaking through 1150 gave the action a very toppy feel. Breadth was close to flat, but volume picked up on the reversal, and that is a negative.

As you'd expect in an uptrending market, the dip-buyers jumped in and helped bounce us after we took out Wednesday's lows, but they didn't gain much traction in the afternoon, and we ended with a weak close.

There wasn't any panicky selling, but there was distribution, and we didn't come back with enough vigor to scare out the new bulls. The major indices are still in an uptrend, and the action today didn't do much to change things, but momentum is definitely slowing and the danger of a rollover is increasing.

Probably the most negative thing about the action today was that many of the key big-cap leaders like NFLX, AAPL, VMW, AMZN, etc. were relatively weak. That may just be some end-of-the-quarter profit realization, but if momentum in those sorts of names continues to cool, that will negative implications for the broader market.

The first couple days of a new quarter often have a positive bias as new money is added to retirement funds, but then we have a lull until earnings reports start to hit in a couple weeks. In the interim, we are going to be very focused on economic data and any hints they provide about the likelihood of Quantitative Easing II. That is still the primary market driver right now, and good economic news may actually be a market negative if it makes further quantitative easing unlikely.


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