Stocks Stay In Tight Range As Early August 2012 Trading Lulls On Exceptionally Light “Vacation Volume”
Traders were reticent to make bold moves in the last few trading days as the NASDAQ and S&P 500 crept higher but with no conviction. The Dow Jones Industrial Average fell to 13,165.19 -10.45 or -0.08%, the NASDAQ rose to 3,018.64 up 7.39 and the S&P gained .58 to 1,402.80 or +0.04 percent on extra light vacation volume as traders kept clear of the market. Volume has been light for years but this week has been exceptional. Traders are unsure if they should add to long positions and the upward momentum has ceased.
Financials, tech and small caps are giving no clear directional clues. This is a tough market for trading and usually follows a strong push move to the upside or downside after a few days of consolidation. Tight ranges are not profitable and a move to the upside or downside would make analysis easier and less risky. We are waiting for the market to decide which direction to take but downside risks may be slightly higher after moving up significantly last week.
The small cap sector and technology have nudged higher but not in a way that invites broad participation. Time to take a defensive posture. The tight trading range this week means the rally will extend further after a brief slide downward and we expected rangebound trading this week. A sharp upside move would invite shorts and decrease the chances of a positive August. ”Vacation volume” if persistent will keep traders from making decisions and the TLT 20 year bond exchange traded fund rose today signaling the brief run for equities could be teetering short-term.
The TLT hit our projected low today – see ”Stocks Extend Early August 2012 Rally But Small Caps Underperform - August 7, 2012 -
The TLT has given us more evidence that bonds are becoming less attractive and it gapped down today after rebounding from downward pressure late yesterday. We would not be buying the TLT on dips and expect it to go to $124 or lower in the near term.
TLT hit 123.75 today – stay tuned.