Damn low volume, full speed ahead! An apparent lack of sellers helped push the Dow Industrials up another 80 points to close at 16,919.59. Reports out today showed inflation pressures remain limited and housing starts jumped. The S&P 500 Index gained .50% while the Nasdaq Composite “lagged,” up only .43%. Yesterday morning a major investment banking firm came out with a report that they expected the S&P 500 to gain only 1% the rest of the year. I hope they meant as of year’s end because between yesterday and today the index is up 1.40%
ITB, the home construction ETF, gained 2.39%. It closed back above its 50- and 200-day SMAs on more than 1.5x average daily volume. UNG, the natural gas ETF, rose 2.16% but for the second time in a week halted at its declining 20-day EMA. Please click on the symbols for details.
Despite the strong advance the market has made the past week and a half, I’m still not seeing too many signs that the advance is overbought yet. The composite long index I created back in 2010 is helpful here. I developed the composite indexes, both long and short, using High Growth Stock Investor software. The long composite combines the following non-leveraged, index ETF’s:
I created the short composite by combining the following non-leveraged, short index ETF’s:
The composite index then has Bollinger Bands applied to it. The +/-2 standard deviation bands typically applied in a Bollinger Band includes 95% of all the data while +/-3 standard deviation bands includes 98% of all the data. The price bars in the long composite chart below are flanked by 2 standard deviation (blue solid lines) and 3 standard deviation (red dashed lines) Bollinger Bands. The green line is a 4-day SMA. The data in this chart is as of yesterday’s close:
Below the composite index and the Bollinger Bands is the SPX. You can see the S&P tends to pull back after the composite index hits the +2SD Bollinger Band. We’re not there yet.
The light volume the past couple of weeks is no doubt due to it being August. Light volume moves can be sharp in either direction, and decreasing volume while prices move higher usually is a trap. Having said that I received an e-mail last week commenting that volume has been below average almost every month since the market bottomed in March 2009. Very true.
Unless all hell breaks loose tomorrow I won’t blog again until Thursday. I will update Subscribers Only! tomorrow, however. And speaking of Subscribers Only!, today it discusses a Larry Connors swing trade idea in an ETF with a historic success rate of 79% and an average gain of over 1% in a little longer than 6 days. What ETF is this? For just one-twentieth of a Benjamin, a mere $5, you can find out. Click on the Subscribers Only! links to subscribe. New subscribers get the first two weeks of service for free.
See ya’ll on Thursday.