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Stocks Post Modest Losses As Volume Drifts Lower

Stocks jogged to a negative finish Wednesday, although in softer volume.

The NYSE composite, S&P 500 and the Dow each lost 0.2%. The Nasdaq edged down 0.1%. Volume was down on both major indexes. An East Coast blizzard contributed to the slower trading.

Few leaders showed any gumption Wednesday. Breakouts have been nonexistent to rare recently.

With the market in correction, investors are best off staying on the sidelines and building watch lists. Focus on stocks with strong fundamentals. Some of these stocks, such as Priceline (PCLN), appear to be forming bases.

Strong stocks often use a market correction to form positive patterns. The market, though, still reflects institutional selling. For example, the Nasdaq's Accumulation/Distribution Rating has been stuck at a lowest-possible E for 10 consecutive sessions. The NYSE composite has been at E for 15 sessions in a row.

While it's unusual for an index to be stuck at E for a long time, it's not unprecedented. For example, on May 25, 2004, the Nasdaq followed through after 11 consecutive sessions with such a poor Acc/Dis Rating.

An E rating isn't necessarily bad for a market follow-through.

Follow-through days that occur with the index at E usually work, recent history suggests. There were six follow-through days since 2000 that came with the index showing E ratings. Only one failed.

What you don't want to do is jump the gun. The indexes have corrected 8% to 11% in this decline. But there's no assurance that lows have been made. Wait for a follow-through day to signal an uptrend is under way.

A follow-through day involves a significant gain in a major index in higher volume than the prior session. It must occur on Day 4 or later of a rally attempt.

5:15 p.m. Update: Stocks slipped after a back-and-forth session Wednesday, as investors mulled a report suggesting help for Greece, a growing trade deficit and Fed Chairman Ben Bernanke's outline for the stimulus exit.

The Dow, NYSE composite and S&P 500 lost 0.2% each. Intraday, the NYSE composite was down as much as 1.2% and up as much as 0.2%. Meanwhile, the Nasdaq fell 0.1%. A heavy snow storm back East dampened trading volume on both exchanges.