Retail Sales Gives Investors Hope

February 13, 2008

A positive piece of economic news stating retail sales beat expectations and actually showed an uptick in consumer activity, which gave the market an injection of optimism that was much needed. Investors hope that Bernanke won’t let them down tomorrow morning either when he is scheduled to speak. With that said, this was the most action the market has seen in a few days. However the pessimistic side has to come out also, and when we see a rally on weak volume, as we did today, plus the fact that we are nearing overbought conditions, sends a strong signal that we should be very skeptical and slow to embrace this rally.

Over the last five trading sessions, volume has continued to deteriorate in this rally-mode we currently find ourselves in.

Let’s review the charts…

NASDAQ was the big winner, but did so on anemic volume levels, and indicators point to the market being almost overbought. With that in mind, don’t be surprised if we run into some profit taking tomorrow.

S&P fared well but still trades within its downward channel. We need to see the index break through this channel, and past the February highs if we’re going to even consider embracing this rally.

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