The market continues its trek upward that began in or around Draghi's insistence that the ECB would do whatever it takes to save the Euro. The SPY closed over the 140 level, corresponding to the 1,400 level on the S&P 500 index, in yesterday's trading. Although the market has been trading up (and may continue to do so over the near-term), I cannot get over that the rally appears to be on fumes.
For one, you will notice that the advance over the last three trading days has occurred on what can only be considered anemic volume. The price on the SPY is also running into swing points with higher volume, suggesting there is no conviction in this move. For instance, yesterday's advance of the SPY occurred on 109.5 million shares. This is running into a swing point on May 1, where 138.8 million shares traded. Today's share count is not enough. In addition, the market looks to have rejected the $141 price level, as the SPY closed near the lows of the day. This may be a sign of a failure, noting that this morning's futures suggest a lower open. One last note, the higher move in the SPY is not being confirmed in the more economically-sensitive small-cap stocks. The IShares Russell 2000 Trust (ticker IWM) remains 7.5% off its $86.39 high logged in April 2011. I also note that the IWM also showed a price failure running into a higher volume swing point (May 3, $80.62, 61.2 million shares vs. 50.1 million shares yesterday)
The portfolios I manage have been up in recent days, due largely to the exposure to gold stocks and coal. I remain largely in cash with a small short position (largely as a hedging tool). I may consider upping my short exposure in the coming days or weeks.
For one, you will notice that the advance over the last three trading days has occurred on what can only be considered anemic volume. The price on the SPY is also running into swing points with higher volume, suggesting there is no conviction in this move. For instance, yesterday's advance of the SPY occurred on 109.5 million shares. This is running into a swing point on May 1, where 138.8 million shares traded. Today's share count is not enough. In addition, the market looks to have rejected the $141 price level, as the SPY closed near the lows of the day. This may be a sign of a failure, noting that this morning's futures suggest a lower open. One last note, the higher move in the SPY is not being confirmed in the more economically-sensitive small-cap stocks. The IShares Russell 2000 Trust (ticker IWM) remains 7.5% off its $86.39 high logged in April 2011. I also note that the IWM also showed a price failure running into a higher volume swing point (May 3, $80.62, 61.2 million shares vs. 50.1 million shares yesterday)
The portfolios I manage have been up in recent days, due largely to the exposure to gold stocks and coal. I remain largely in cash with a small short position (largely as a hedging tool). I may consider upping my short exposure in the coming days or weeks.
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