Jerry Samet
10-05-2014, 11:32 AM
The market rebounded on Friday on news of a stronger than expected employment report. The major averages gapped higher at the open and reached their highs in the first couple of hours of trading. They then held most of those gains for the remainder of the session and closed near their intraday highs. The SPY led the way higher with a gain of 1.12% while the COMPQ was higher by 1.03%. Volume was a key here. It was lower on the Nasd and very slightly higher on the New York. This shows there was not much buying power behind the rally. The major averages also remain below their important 50dma’s. Leading stocks were higher as well with the leaders index up by 1.36% on the day. The index closed in the lower half of it’s trading range and the red candle shows that the index closed below it’s opening price, a sign of little buying pressure. The index tagged it’s declining 9dma and remains below it’s also declining 17dma. It must regain the 17dma for the picture to improve. Volume on the index was well below the three previous red candles and was below average, showing that there was little enthusiasm for these quality growth stocks among institutional players. The fact that small and mid cap stocks lagged on the rally shows that buyers are going for the safety of large cap and more defensive names. The COMPQ and SPY remain just below their respective 50dma’s. They must break above these critical moving averages with conviction if the market is to move meaningfully higher. What we have seen so far does not build a lot of confidence.