- Just about everything bounces back on Monday: stocks, oil, gold, bonds, commodities, but not the dollar.
- SP500, NASDAQ retake the February high, manage to hold it on the close, but volume is rather pathetic.
- Shocking new housing market statistics once again prove that governments cannot prop up markets once the market collapses.
- Rubber match week continues as indices bounced as they should have but the volume is disconcerting.

MARKET SUMMARY

Bounces across the board, almost.  Now the question is will stocks and commodities, specifically oil, hold the bounces and continue?

I styled this week the rubber match given the setup.  NASDAQ and SP500 made the break over the February peak and rallied past that level.  They then tested the move last week, along with oil, gold, commodities, etc.  Everything seemed to fall.  Stocks held where they needed, however, and are trying to bounce.  Friday a half-good jobs report bounced stocks . .  for half a session.  That set this week as the rubber match: would they bounce or would they fold?

Monday they followed through, so to speak, managing to move over the February high and held the move on the close.  NASDAQ gained 0.55%, SP500 0.45%, DJ30 0.36%, SP600 0.94%, SOX -0.29%, and NASDAQ 100 0.33%.  So far the upside has the advantage as some quality stocks moved as well, good leadership stocks that can carry the market higher.  We bought into them as they made the move.

Problem is, volume was anemic.  No, it was pathetic with 20% and 25% declines on NASDAQ and SP500, respectively.  After volume improved to end April and start May, it suddenly went dry on an important upside move.  Not a great indication that the buyers are going to stand by their stocks and keep the rally moving, but not definitive in itself.  It definitely keeps the ‘rubber match’ in play as the next session unfolds.

TUESDAY

Second day of rubber match week and once again and important one as NASDAQ and SP500 moved through a key level but on very low trade.  Techs look ready to fill in and help out leading sectors such as retail.  It needs to do that.  It would be nice if energy and financials came to SP500′s aid as well. 

That is the rub is it not?  The indices are set up to move, many stocks are set up to continue moves or start new ones, yet they have to do it.  Monday was decent in terms of points, but the volume was poor.  Leaders will have to continue taking charge to keep this move heading back up off the test.

Looking at those leaders you can still see many in position to break higher and indeed many started to do so.  If they continue to lead we will continue to buy into positions.  Not because we are big believers in the move, but because for now the Fed is doing just what it did in the housing market, i.e. keeping the money flowing.  It won’t call it QE 3, at least not yet, but it has said it will maintain its balance sheet, effectively doing the same thing it is doing now.  That means the liquidity remains and thus stocks will still have money put their way as banks and those holding those funds put them into financial markets.  They certainly are not loaning much of it so they need to put it somewhere.

Again, that means we continue to look for good stocks in position to move.  With money flowing in, pick up the stocks showing the best patterns to run higher.  We have done that most of the move so we will continue.

At the same time this Monday bounce didn’t stamp any seal of approval on this test and nascent bounce.  Thus we keep our heads, watch for good moves, and step in though we don’t have to jump in head first.  We also have some downside plays on hand just in case the bounce does not pan out and the market needs to test more than expected.  Again, the rubber match has to play itself out.