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Price and volume in the major averages give subtle messages about underlying market health all the time. Knowing how to interpret it can have investors in the market at the right time and out of the market at the right time as well. Investing during market uptrends can be highly profitable but investing during market downtrends is often a losing proposition.

Some viewed Friday's big percentage gains by the major averages as a sign that stocks have bottomed. Unfortunately, Tuesday's higher-volume declines by the S&P 500 and Nasdaq Composite already calls the nascent uptrend into question. Sellers came into the market late in the day after Senate Majority Leader Harry Reid said little progress was being made in the fiscal cliff talks.

Tuesday was a day of unequivocal distribution. It's generally not good to see a higher-volume decline in the indices so soon after a new uptrend is confirmed. It calls the viability of the nascent rally into question. In other words, there's no need to be aggressive with new buys at this point. Going forward, higher-volume gains and lower-volume declines would be good to see. That would be a sign of improving market health. If it happens, a new crop of buy candidates should present themselves as well.

Meanwhile, earnings season is pretty much over, but after the close Tuesday, Green Mountain Coffee Roasters (Nasdaq: GMCR) surprised the market with a strong earnings report. Excluding one-time items, fiscal fourth-quarter profit rose 36 percent from a year ago to $0.64 a share while sales rose 33 percent to $946.7 million. The Thomson Reuters consensus estimate expected earnings of $0.48 a share on sales of $902.2 million. Green Mountain also issued solid fiscal first-quarter guidance.

But one strong quarter doesn't mean that Green Mountain has turned the corner. The company was first to market with its single-cup Keurig brewing machine and K-Cups, but competition continues to intensify. Many companies, including Starbucks (Nasdaq: SBUX) and Kraft Foods (NYSE: KFT) now offer competing single-cup brewers and coffee packaged in K-Cups.

Shorts ran for cover in after-hours trading and the buying continued in early pre-market trading Tuesday. Shares rose 23 percent to $35.59. As of November 15, short interest in Green Mountain stood at 51.5 million shares, more than double 24.3 million shares held short six months ago. Suffice to say that short interest will probably be lower after today.

Meanwhile, another quarter of solid bottom-line and top-line growth by The Fresh Market (NYSE: TFM) early Wednesday was overshadowed by news of the resignation of Chief Financial Officer Lisa Klinger who accepted a similar position with a private equity-backed apparel retailer. Shares plunged 9.6 percent to $54.47 in pre-market trading. The Fresh market went public in November 2010 at $22.

Quarterly profit rose 21 percent from a year ago to $0.23 a share, 3 cents below the consensus estimate. Sales came in slightly better than expected at $321.5 million, up 22 percent from a year ago. Same-store sales rose 5.6 percent.

Posted-In: Earnings News Markets Movers Trading Ideas Best of Benzinga

 

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