After two days of very orderly selling with light selling volume the bull looked ready to charge again with ferocity.  The set up was there and the bull charged but it was a half hearted, tired attempt at resistance levels of the major indices.  How could I make a statement like that on a day the Dow rose nearly 200 points with volume higher than the day before (technically accumulation)?  Volume continues to wane as we get closer to key resistance levels.  I want to see massive buying before I’m convinced the market has hit a longer term bottom rather than a short term pause point in a bear market.  I’m not there yet.

The market continues to focus on the positive news as it brushed aside the Fannie Mae dividend cut and cheered the ADP employment report as well as increased productivity and factory orders.  The market is also pricing in some kind of a Fed cut and imminent news of some government meddling into the subprime mess.  Fortunately the meddling won’t be sweeping according to the New York Times:

"The agreement, to be formally announced Thursday by President Bush, is expected to contain numerous limitations that would exclude many — if not most — subprime borrowers, according to industry executives who have seen it. It would exclude those who are delinquent on their payments — about 22 percent of all subprime borrowers, according to First American LoanPerformance, an industry research firm.

The plan is also expected to exclude any borrower whose introductory rate expires before Jan. 1. About $57 billion in subprime loans are scheduled to be reset at higher rates in the final three months of this year, according to estimates by First American LoanPerformance."

What happens when the Fed finally concedes it can’t continue cutting rates at this pace?  Then what are we left with?  As a technical trader I try not to focus on those things but rather focus on what’s in front of me.  What buyers and sellers are telling me.  Today’s move certainly sets us up for further strength into the open tomorrow but lets remember that the indices have just a bit of breathing room left before hitting very strong resistance levels and buy volume continues to subside.  With a glance at the action in leading stocks recently, I continue to see more volume on the sell side than on the buy side AND Pharma and Bonds are showing up as leading sectors right now.  Not exactly the stuff bull markets are made of is it?  If you’ve recovered much of your losses from the Oct/Nov sell off, you might want to consider locking in some of those gains soon.

Resistance in the Indices:
Nasdaq: 2725
S&P500: 1490 – 1500
Dow: 13500 – 13600
Russell 2000: 800

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day December 5th 2007

Nasdaq: UP 1.78% today with volume right at the average
Nasdaq ETF (QQQQ) UP 1.78%, volume 18% BELOW average
Dow: UP 1.48%, with volume 1% BELOW the average
Dow ETF (DIA): UP 1.53%, with volume 23% BELOW the average
S&P ETF (SPY): UP 1.67%,  with volume 15% BELOW the average
Russell Small Cap ETF (IWM): UP 1.92%, with volume 20% BELOW the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  Leading stocks were about in line with what the major indices did today, but notice the volume behind rising stocks versus declining stocks.  This has been the trend of late and is a bit of a red flag.

Summary:

* Advancers led Decliners 247 to 60
* Advancers were up an average of 2.55% today, with volume 4% BELOW average
* Decliners were down an average of 1.64% with volume 57% ABOVE average
* The total SI Leading Stocks Index was UP 1.73% today with volume 8% ABOVE average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days):  
Pharma, Bonds, Utilities
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Semis, Networking, Retail, Telecom

* Today’s Market Moving Industries/Sectors (UP):
REITs, Real Estate, Broadband, Networking, Energy

* Today’s Market Moving Industries/Sectors (DOWN):
Biotech, Oil, Commodities

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.  The leading stocks that moved significantly with volume today are too extended past a proper entry point to highlight for Stock of the Day, but you might want to take a look at the list of movers for trading ideas.  Stocks are listed in order of best Total Rank (fundamentals + technicals) 

Chicago Mercantile (CME)
Vimpel Communications (VIP)
Millicom International Cellular (MICC)
Airgas (ARG)
AsiaInfo Holdings (ASIA)
Vocus (VOCS)
Versant (VSNT)
AeroVironment (AVAV)
VistaPrint (VPRT)
Darling International (DAR)
Harsco (HSC)
Rick’s Cabaret (RICK)
General Dynamics (GD)