Market Notes and Observations for a Thursday

The headlines are noting the closing record highs in the Dow and S&P 500 Indices. Here are a few observations from my data:

* Short-Term New Highs/Lows Are Tepid - On Wednesday's record close, we had 851 fresh 20-day highs across the NYSE, NASDAQ, and ASE and 751 new 20-day lows. Hardly broad participation. I'm looking at the current action as a topping process unless we can see a broadening of the rally.

* Demand/Supply Is Also Mediocre - Demand (an index of the number of stocks across the three exchanges closing above the volatility envelopes surrounding their moving averages) was 85; Supply (index of issues closing below their volatility envelopes) was 64. This is actually a loss of momentum relative to the prior trading session.

* Even S&P New Highs Are Weak - Wednesday was a record close, but only 48 S&P 500 stocks made new 52-week highs. That's down from over 70 two weeks ago and almost 90 last month.

* The Dow is Getting Popular - I took a look at the top 25 dollar volume issues on Wednesday. DIA was number seven. Before the recent market rise, DIA only very occasionally hit 10,000,000 shares--and those occasions occurred during selloffs. We've now had five consecutive weeks above 10,000,000 shares in DIA, four of which have occurred during rising weeks.

* Energy is the Hot Sector - Of the top 25 dollar volume issues, six are energy related: XOM (#6); OIH (#10); XLE (#14); VLO (#20); COP (#23); and CVX (#24).

* Emerging Markets Have Already Emerged - I notice that EEM was #11 in dollar volume traded on Wednesday. On signs of waning money flows, I will happily short energy and emerging markets. The key is being patient and letting those dollar volume flows lead the way.

* New Readings - I've updated the Articles page on my personal site, with articles divided into trading techniques and trading psychology and also organized chronologically.