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Shorts Ran For Cover as Stocks Run Higher on Lower Volume

 May 18, 2009 06:17 PM


Lacking any economic catalysts to begin the week stocks started the day off gapping higher.  Volume tracked lower for much of the day indicating institutional players were sitting on the sidelines staying away from the action.  It appeared the action was driven by short-sellers covering their positions.  It was certainly disappointing to see volume come in lower on such a large percentage move on the indexes.  At this point, a day with gains is nice but at some point we need accumulation to support this uptrend.

Price and volume action is the most, the most important action to consider on the exchanges.  The next is seeing how leaders are acting.  Leaders are found  in the IBD 100 and IBD 85-85.  Normally, leaders emerge rather quickly from market corrections.  However, this correction was quite severe and from past severe market corrections leadership may take months to form.  It should come to no surprise that this market is lacking IBD leadership.  At some point, for this uptrend to continue the IBD 100 and  IBD 85/85 indexes must be  leading this market. 

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There were some positives today as we did see leaders have an excellent day.  A few of them found support with volume.  A clue that there is institutional support for these leaders.  We are on top of them here at Big Wave Trading and are ready to take advantage of these leaders if they begin to breakout.   These leaders will run and show is Monster Stock gains.  Not only will they be Monster Stocks but they will be the tell when the market begins to stall out.  Junk-off-the-bottom have led this market up to this point but for this uptrend to continue any further we'll need to see the IBD indexes lead.

[Related -Are Lower Yields Signaling Higher Risk?]

Be sure to check in later for further updates!

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