Jerry Samet
03-02-2020, 06:27 PM
The market produced a strong rally today, at least on a price basis. The major averages opened higher after the Japanese central bank injected liquidity into the system. The hope was that other central banks will follow. After a little weakness the major averages rallied into the close. All the major averages finished at or very near their intraday trading highs. The COMPQ and the NDX gained 4.43% and 4.92% respectively. The SPX rallied 4.60%. Volume was the real problem, it declined across the board. It was off by 27.75% on the New York and 20.49% on the Nasd. This shows that there was much less buying pressure today than there was selling pressure last week. Leading stocks also rallied today with the leaders index gaining 3.37% on the session. The index closed high in its trading range on lower but above average volume. After Friday’s late rebound I said that we might see a short term bottom. That may be happening. Hopes that the world’s central banks will step in with new liquidity sparked a rally today. The high closes are supportive, but the lower volume shows that large institutional players were not jumping back in today. We are in a very volatile situation where news stories about central bank actions will cause strong rallies and bad news about the coronavirus will cause large selloffs. It is difficult to make progress in this environment. The action today had the feel of a big rally day in a bear market. The largest percentage gains in the major averages all occur during bear markets. Gains of over four percent are suspect. We saw that today. The next step for the major averages would be to regain their 50dma’s on heavy volume . That would be encouraging. Right now the evidence still suggests that there will be lower prices ahead before an important bottom is in. The beach looks pretty good right now. Jerry