Guilty! - Leading Stock Review
Guilty on all 14 counts. That was the verdict rendered against Galleon Group hedge fund founder, Raj Rajaratnam. His defense team has already announced their intention to appeal to the 2nd District Appeals Court in New York. Apparently his lawyers do not believe the 46 recorded conversations should be allowed as evidence. I believe the SEC was granted a wiretap after demonstrating a series of suspicious trading activities in Galleon accounts. Turns out they were onto something but not if Raj's defense can stop it. There are many similar cases waiting to be tried. Let's hope justice continues to be served!
Leading stocks struggled through another week. We started last week with a rebound but trade volume was light. For more confident buying we need to see volume pick up.
The rebound continued as we moved into Tuesday but action by stock market leaders was mixed. Trading volume rose as the market recovered recent loses but volume for market leaders from the IBD 50 was weak. Only 7 stocks traded on above-average volume. For the stock market to move out of this correction with confidence, we will want to see the market leaders trading on higher volume.
Any constructive market action took a set-back on Wednesday when broad indexes shed from 0.9% on the NASDAQ and 1.4% on the NYSE. The back and forth action has been a common theme since mid-February. It's impossible to know if stocks are going to move higher or lower, but eventually the market will reveal its intentions. Right now it is best to be patient but alert for a change in market character. Five of the leading stock from this bull run, Netflix, Priceline, Apple, Lululemon Athletica and Baidu did not see any intense volume which indicates the mutual funds invested in these companies did not see a reason to buy or sell shares.
After starting the day low, stocks reversed to close higher on Thursday. Usually a positive sign, action again came on lower volume. Much of the day's upside was powered by lagging industry groups. Ideally leading industry groups would be powering a stock market advance.
The week was closed out with a low volume decline. The NYSE along with several leading stocks have now crossed below their 50 day moving average. Moving averages act as support and resistance lines and can provide additional information about the overall health of the market. The broad indexes finished the week mixed, but the IBD 50 led with a gain of 0.6%, a sign of some internal market strength.
Last week's positive finish for market leaders did not last long. Monday sellers thwarted a rebound effort during the afternoon session pushing stocks lower. Again, lagging industry groups led market action. Preliminary volume was higher on the NASDAQ where most of the selling took place and only slightly down on the NYSE. Technology related groups experienced some of the biggest declines.
As we start a new week markets remain in a correction. In this environment is it best to hold off on new purchases until we have a better since of the markets intentions.