March 25, 2008
For most, it was expected that the market would continue its rally, but instead we got a day in which the indices finished in mixed fashion. However, encouraging to investors was that the market was able to put aside a report showing consumer confidence slipping and another showing that housing prices continuing its decline. In previous weeks the market would have likely sold off hard on such news, but instead it traded sideways – undoubtedly something to hang your hat on.
With that said, there are still a couple of major hurdles that need to be cleared, before we can begin putting any faith into the market’s current move. First, it needs to break the highs from February, and secondly, the markets are bound to pull back at some point, especially with the indices heading towards overbought conditions, but a pullback on light volume or consolidation near the recent highs, would go along ways in restoring investor confidence.
Until we see the above mentioned events take place, we should remain guarded, and protect our capital at all costs. If this rally is sustainable, then we will have plenty of opportunity to join in on the run.
Let’s review the charts…
NASDAQ consolidated its gains from the past two days. However, as mentioned in prior write-ups, we are seeing the index rally on light volume which leaves us skeptical as to whether it can hold these gains.
S&P took an important step in not falling back below the 50-day moving average. Nonetheless, the volume continues to weaken and we should be very careful about committing any capital too aggressively at this point.