This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

This Stock Market Is Not for Amateurs, Part 2

Stocks in this article: AAPL FB NFLX UVXY

NEW YORK (TheStreet) -- Have I ever mentioned the word "volatility" in reference to the stock market in 2014? Of course I have! Case in point: Monday.

The DJIA was down 124.48 points Monday morning, the S&P 500 was down 14.37, the Nasdaq was lower by 37.55 and the Russell 2000 was lower by 13.70 points.

By late morning, three of the four major indexes had recouped all their losses and turned green. The DJIA finished the trading day up 17.66 points at 16530.55 and the S&P closed up 3.52 points at 1884.66. The Nasdaq was the big winner today, closing up 14.16 at 4138.06. The Russell 2000 closed down 2.50 points at 1126.30.

The three big momentum stocks led by Apple (AAPL), Facebook (FB) and Netflix (NFLX) powered the markets higher. There is no question the hedge fund community still needs to own the momentum stocks right now.

The big negative in trading Monday was, once again, volume or lack thereof. The S&P 500 Trust Series ETF (SPY) had its third-lowest volume day of 2014, trading 71.6 million shares.

Where is the buying conviction in this market? As I have said on many occasion, when a stock market continues to rise on lower volume and unchanged volatility, that is bad. The market is getting closer and closer to falling under its own weight.

The Nasdaq and the S&P 500 are the two indexes that are in overbought territory, according to my algorithm process. The DJIA had a negative internal correlation. That simply means the DJIA index closed higher on Monday as the algorithm number was heading lower. The Russell 2000 continues to march to its own drummer. It has not participated at all with the other indexes, continuing lower.

I suspect that the market will open Tuesday trading to the upside as the algorithm-programed machines continue to push the S&P index closer to the extreme overbought signal.

Traders and investors need to be patient. The amount of risk that is involved in chasing or buying this market at these levels is extreme. You must allow the high frequency traders do what they do. Your job is to be cautious and wait for better buying opportunities at lower prices. Buying a market that is approaching extreme overbought signals is not a recipe for success.

Contrary to what most Wall Street pundits believe, the falling interest rates in the bond market is a sign of a growth slowing economy. The spread between the 10-year and the two-year note is huge. Another sign of a growth slowing signal. Be careful out there. This market is treacherous.

On Friday I was long the ProShares Ultra VIX Short-Term Futures ETF, (UVXY). I sold those shares this morning on the ramp higher for a 2.58% gain. At the close of trading, I added those shares back.

At the time of publication the author was long UVXY.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,765.10 -13.05 -0.07%
S&P 500 2,064.25 +3.02 0.15%
NASDAQ 4,756.8210 +8.4250 0.18%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs