By Nicholas Santiago on September 2nd, 2010 10:19am Eastern Time
Yesterday the major stock market indexes surged higher on the back of positive Chinese data, a positive ISM Index in the U.S., and a severe decline in the U.S. Dollar Index. This sharp reaction higher in the stock market obviously caught many short traders and investors off guard in the short term. Recently many talking heads in the media had been talking about the bearish Hindenberg Omen. This bearish technical and fundamental setup was actually featured on the Yahoo homepage and also on many local news channels that never feature the stock markets. While the markets could still decline it will rarely do so when the public knows about it. The stock market is just not that easy. Remember if it was everyone would do it. Don't you all remember the 1920's or the so called 'roaring twenty's. What about the more recent 1990's? The tech bubble or the dot com bubble are historic events that will be read by many generations of people to come. This is now a traders market and not meant for the buy and hold investor any longer. The easy money that comes along once or twice in a century has been made already.
Normally after a large point move in the market the next trading session is usually a flat type of trading day. It is natural for markets to often pause or consolidate the gains after a major advance or decline. Tomorrow is also the highly anticipated government non-farm payroll employment report for the month of August. Therefore, today the market indexes could experience very light volume after the first couple of hours of the trading session.
This morning most retail stocks are trading higher helping to keep the markets positive. The Retail Holders Trust (NYSE:RTH) is trading higher by 0.92 cents to $90.60. This ETF surged higher yesterday and remains strong today. Costco Wholesale Corp (NASDAQ:COST) is another leading retail stock that is trading sharply higher today. Costco Wholesale Corp is trading higher by 0.91 cents to $58.70. Other leading retail stocks that are moving higher are Nordstrom Inc (NYSE:JWN), and J.C. Penney Inc (NYSE:JCP). When retail stocks rise it is often an indication that the consumer is spending money. This is a positive for the economy because consumer spending accounts for more than 70.0 percent of the gross domestic product in the United States. Should the retail stocks begin to decline then traders and investors must be careful as this would be a sign of contraction in the economy.
In any case we are really not expecting fireworks today before the government employment report. It is also important to remember that the next trading day after a major rally or decline is usually a pause or small consolidation session for the major stock indexes.
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