The market had a good rally on a price basis yesterday. The major averages opened higher and were strong through out the day. Late strength allowed them to finish near their intraday highs, which is a good sign. The COMPQ was up by 1.57% while the SPY was higher by 1.03%. The factor that was lacking was volume. Trading volume was lower across the board on Friday. This continued the pattern of declines on higher volume and rebounds on lower volume. It is surprising that volume would be lower on an expiration Friday. On the other hand it was a Friday in the summer which usually sees lower trade. Overall the lower volume on a rally day shows that institutional players were not strong participants in yesterday’s action. Leading stocks had a solid session as well with the leaders index higher by 2.27%. Volume was higher than on Thursday but still below average. The index closed near it’s intraday high and is back above the important 17dma. Both the major averages and the leaders index appear to be in consolidations right now and their future direction is unclear. Late cycle rallies such as we are in now are difficult to play. They rarely produce strong gains and are prone to the kind of sharp reversals that make it hard to manage positions. Until we get a clearer idea of where the market is headed a large cash position is probably the prudent course of action. Jerry
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