NEW YORK (TheStreet) -- What a volatile trading day it was on Monday -- all the indexes roared out of the box, making huge gains, only to see those gains all wiped out before regaining their footing at the close.
The DJIA was up 138 points in early trading at 16500.37 before losing all those gains and hitting an intraday low of 16312. The DJIA closed at 16448.74, up 87.28 points. The S&P 500 closed at 1869.43, up 6.03 points.
The Nasdaq and Russell 2000 indexes, both in Trend Bearish territory as I have mentioned on many occasions, closed in the red today. The Nasdaq closed down 1.16 points at 4074.40. This was on the heels of Apple (AAPL) soaring 22.34 points to close at 594.28. One can only imagine what the Nasdaq would have looked like without the huge AAPL gains. The Russell 2000 closed down 5.97 points to finish at 1117.06.
Once again, we have two different markets. The DJIA and the S&P 500 vs. the Nasdaq and the Russell 2000. This is not a healthy stock market environment.
The volume on Monday, which is always a concern of mine, finally showed some nice upward movement on a green day. The S&P 500 Trust Series ETF (SPY) traded well over 110 million shares on Monday. This was the first time since April 15 of this year.
I would like to make a comment about my algorithm process that I utilize at www.strategicstocktrades.com. When I observe volume in relation to price movement, I like to look at the weekly trend, which is a three-month or longer time frame. The volume indicator, which I term the SST Volume Trend, has been showing a bearish divergence with all the index price movements since the week ended Dec. 20, 2013. As the price of the indexes has continued to rise, the volume has been steadily falling.
There is not a lot of buying force behind this upward trend in index prices. This is known as a negative divergence. It is just a matter of time before the market indexes will start to roll over. As a matter of fact, we may be seeing that take place at the present time. That is why the Nasdaq and the Russell 2000 indexes have been diverging from the DJIA and the S&P 500.
What this all means from a trading standpoint is be cautious. The perceived strength behind this market is not as strong as it appears. This market has no memory from day to day, let alone week to week.
Apple, the big winner again today, is now well into overbought territory, according to my algorithm process. It will be approaching the extreme overbought signal Tuesday on green. Watch for AAPL profit-taking to kick in within the next day or two. Chasing AAPL at these levels is not a good idea.
I did purchase two new positions today. I started a long in Lululemon Athletics, (LULU), a large-cap stock with a market cap of over $4 billion. I also started a small-cap long position in Oculus Innovative Sciences, (OCLS). Both are for short-term trades based on my extreme oversold indicator according to my algorithm process.
At the time of publication, the author was long LULU and Oculus Innovative Sciences.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.