Rarely will the major stock market indexes such as the S&P 500 Index, the NASDAQ Composite, and the Dow Jones Industrial Average decline sharply ahead of the weekend. However, the market declined sharply on higher volume last Friday. Traders and investors should not write that type of decline off so fast. This is a market that is being inflated every single day by massive cash reserves from the Fed's quantitative easing program. Traders have been buying almost every dip on a daily basis. Eventually, stock markets need to have pullbacks. If stock markets do not pullback at some point they will simply be on a collision coarse when the manipulation stops. Look what happened in 2007 and later in 2008 to all the major indexes.
This morning Alpha Natural Resources Inc.(NYSE:ANR) has bought out Massey Energy Co.(NYSE:MEE). This news should be bullish short term for the coal sector in the market. Traders should keep an eye on stocks such as Peabody Energy Corp.(NYSE:BTU), James River Coal Co.(NASDAQ:JRCC), and Patriot Coal Corp.(NYSE:PCX). These stocks could trade higher in sympathy to the Massey Energy takeover. The Market vectors Coal ETF(NYSE:KOL) can also see a positive reaction to the news and may very well trade higher today.
As for the overall market indexes it is prudent to allow this market to prove itself. Anytime markets sell off from highs on volume traders should expect that the selling may not end so quickly. Therefore, despite this mornings sharp gap higher the early rally may not last very long. There is usually a bigger reason for declines in the market when they occur on heavy volume.
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