By Gareth Soloway on March 24th, 2010 11:56am Eastern Time
The markets gapped higher today on the back of a downgrade of the debt rating of Portugal and a resulting surge higher in the dollar. While the gap down in the markets was solid, this is a common occurrence for the markets as they usually just get propped up on the open and trade sideways to higher all day. Today, however, could be different. The markets gapped lower only to trade back up towards the flat line in the first hour of trading. This looked normal, this looked like the floating effect that has kept the market near insane levels for almost two months was intact. At 11:00am ET, the markets started to drop. It was a swift drop on light volume. The markets hammered into the 200 moving average on the SPDR S&P 500 ETF (NYSE:SPY). After peircing the 200ma, the markets bounced.
The rest of the day will be interesting. Do we continue lower or will the propping of the markets come back in and lift them on light volume back to the flat line? As of now you must give the markets the benefit of the doubt to the float higher effect. Why? Because that is what has happened almost everyday since the February 5th, 2010 bottom.
Yesterday, many of the leading stocks were weak even though the markets stayed higher. Stocks like Goldman Sachs Group, Inc. (NYSE:GS), Amazon.com, Inc. (NASDAQ:AMZN), Exxon Mobil Corporation (NYSE:XOM) and even Google Inc. (NASDAQ:GOOG) were in that group. Today, many of those are weak again. When the leading stocks cease to charge higher, it does mean we must watch closely and be on high alert. While I would love to say it is a great indicator of a reversal coming in the markets, the light volume propping seems to be able to negate even the most obvious reversal signals.
The key now becomes the InTheMoneyStocks confirmation signal. Should we get a down day, watch the following day for a secondary down day with a close lower than the previous low. This should confirm a reversal in trend. As of now we have not had that since the bottom on February 5th. Join the Research Center to get more guidance, calls, education and all the key levels of this market to watch!
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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