Gap Lower, Turn High. Rinse, Repeat

The markets once again opened lower today, only to have the standard buy the dip kick in. Almost every trading day the markets open lower, then rally slowly up throughout the day, closing neutral to higher. The SPDR S&P 500 ETF (NYSE:SPY) opened at $133.46. This was a drop of 0.39 from the close yesterday. The SPY is now trading at $134.05, the highs of the day.

The reasons for the float are multiple. First, volume drops to a snails pace which enables the markets to grind higher. Light volume always favors the upside when the markets are in an upswing. Positive sentiment makes this so and retail money inches in, believing in the rally. Secondly, the Federal Reserve continues to buy treasuries from the banks, infusing the banks with massive amounts of capital each day. This is part of the QE-2 program. The banks take this money and use some of it to buy the markets. Add this with light volume and the markets are always going to grind higher. Last but not least is the U.S. Dollar. Most days, the Dollar opens neutral to higher and then starts dropping throughout the day. A move lower on the Dollar during market hours has a continued effect on the markets to the upside. A weaker Dollar is still good for U.S. stocks.  The PowerShares DB US Dollar Index Bullish (NYSE:UUP) is trading at $22.40, -0.07 (-0.31%).

All these factors together make for a market that is unlikely to sell off sharply unless a global event occurs that increases volume and sends panic in the air. Egypt caused a one day sell off two weeks ago.  That gives an example of what must occur. Note how that was a one day sell off. To see a bigger sell off in the markets, a multi day sell off, there must be something even more drastic than Egypt.

Apple Inc. (NASDAQ:AAPL) is on the move today, dropping to $358.10, -5.03 (-1.39%).  This is rare with the markets higher but rumors and fears of Steve Jobs’ health continue to persist.

About Gareth Soloway 168 Articles


Gareth Soloway has been an avid swing and day trader since his days at Binghamton University where he studied Economics. After college, Gareth quickly excelled as a financial advisor, helping clients get their financial houses in order. While helping others gain financial independence, he continued to study the day trading and swing trading world, developing a unique market philosophy and proprietary methods. Following his work in the financial sector, Gareth went on to trade alongside professional traders. Unable to tolerate the hype of Wall Street any longer and having an amazing ability to profit using his developed techniques, Gareth Soloway decided to partner with his friend and colleague, Nicholas Santiago to form Chief Market Strategist Gareth Soloway serves as the president and CFO of InTheMoneyStocks.Com.

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