Just a quick post to point out yesterday’s market action (see charts in continuation of this post). Most notable was the volume, which, according to the WSJ, came in at 2.6 billion on the NASDAQ (composite volume) and 2.9 billion for the NYSE (composite volume). That’s the highest daily volume print of the year for the NASDAQ and the NYSE and the 10th highest ever for the NYSE. It was the highest volume day ever for the iShares Russell 2000 Index (AMEX: IWM), the 4th highest day for the Spiders (AMEX: SPY) and the 5th highest for the Cubes (NASDAQ: QQQQ). This big volume comes on a day of market rotation, as the DJIA, S&P 500, and NASDAQ Composite (and Cubes) closed up while mid- and small-cap indexes closed down. All the major indexes opened down, rallied, then closed off their highs, leaving taller upper shadows than lower shadows. Also of note was the sector rotation…
…out of metals and mining groups, some of the highest profile and most hyped cyclicals that some people have convinced themselves are the “new economy” stocks du jour. And I literally heard some crackhead/anchor person/chatterbox call some of these “new economy” stocks and proceed to tell people how they could participate in more upside by introducing a guest who basically said people need to load the boat and do it through his fund. That CNBC sidebar summarizes the main I reason why watch these people: as a barometer of the herd and emotion. These are likely the same people who came into the tech stocks in March of 2000. It happens every time, the only things that change are the names.
Regardless, this sector rotation and volume mean you need to pay attention and clear out of old leaders and look for the new ones, parking money on the sidelines until that new leadership exerts itself and market conditions are favorable. As I’ve pointed out more and more recently, we are 3.5 years into a bull market that is likely near its end. We are also entering a seasonally unfavorable period for equities and the dollar looks like it wants to sh*t the bed in ‘06.
Finally, I’ll make one Crocs Inc. (NASDAQ: CROX) comment for now, which is applicable to this general market post to the extent that CROX is a member of the Apparel-Shoe & Related industry group, which was up 1.5% yesterday, largely due to the rally in CROX. In today’s IBD’s industry group rankings the group is 35 out of 197, up from 106 last week and 123 six months ago. It was also one of the top 10 performing groups yesterday, lead by CROX. Click here for an index of all of my recent CROX postings.
Now onto some of yesterday’s charts. Note the volume and shape of the candles. Could be stealth distribution:
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