Mechanical Bulls

 | Aug 29, 2011 | 4:46 PM EDT
  • Comment
  • Print Print
  • Print

Power outages caused by the hurricane this weekend kept volume very light, but the storm must have disproportionately affected the bears. The bulls were in charge all day, and the buying was tremendously lopsided, with breadth better than 7 to 1 positive and a huge move in the small-cap indices.

What was particularly interesting about the action today was that there were hardly any pullbacks at all. We gapped up to start the day and never looked back. We even finished at the highs on a little burst of volume.

This sort of action is indicative of high-frequency trading. The computers just keep on pushing as they extract their fraction-of-a-penny profit on the move. It is a lot easier to push the market in a straight line once it begins to move, and we saw a good example today.

It was downright humorous to hear all the attempts to explain the action today. Take your choice from window-dressing, Greek banks, hurricane relief, too much negativity, Ben Bernanke, high-frequency trading and so on. It really doesn't matter what the reason was, the important thing was that we took our cue from the price action and didn't try to fight it.

Technically, the bulls even managed to break through last week's high, which looks good but is undermined to some extent by the low volume. You can almost hear the bears muttering about how this is setting up as a bull trap, but these moves have proven to be bear-killers more often than not.

The toughest thing about this sort of action is that there just aren't many easy entries. The charts have never developed very well, and a big low-volume move doesn't do much to improve the situation. The good news is that even if you managed to put just a little money to work, you probably had some gains.

It is tough to believe that the bulls can keep this going without some sort of rest, but they have done it before. In fact, this action feels a lot like the move we had back at the end of June, which everyone thought was window-dressing but went a few more days before it topped.

Have a good evening. I'll see you tomorrow.

Columnist Conversations

volatility is quite low here, and we could see some downsides here in the short term. ...
View Chart »  View in New Window »
this chart is showing great bullish signs here, we like this to take out the old high shortly. ...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.