BIggest Selloff Since 2004 Hits The Indexes Hard; Volume Increases Giving Another Distribution Day

A massive selloff hit the entire stock market, on Friday. All indexes fell: Nasdaq 2.4%, SP500 1.8%, DOW 1.9%, SP600 1.3%, Nasdaq100 3.1%, SOX 4.2%, IBD100 1.5%, and GOOG 8.5% (cnbc acts like it is an index, might as well). Along with the large declines came a pickup in volume, giving the Nasdaq its 2nd distribution day in three days (3 in 4 in IBD; my charts show different) and the SP500 its 3rd in four days. Breadth was decisively negative with three decliners to every stock that advanced. However, if you look at the indexes that favor small caps and mid caps more to large caps, you will see they did much better and most leading stocks in those indexes held up well today.

The reason for todays decline was everywhere. Though I am not sure which reason was the dominate one, when combined all took a big toll on the market. Everyone was blaming the OBL tape, Iran, oil, and weak earnings for the selloff. I think expectations were too high for earnings and that along with the news events of Iran was bound to hit the market with a steep loss.

The one obvious positive from a day like today is the fact how well small caps held up. My portfolio didn't do that bad Friday at all. There were some big hits and pullbacks here and there but the majority of my stocks pulled back softly on lower volume or ticked up a bit. The concentration of the selling today was obviously in big caps. I saw tons of big cap banks, techs, and medical stocks get rocked. Just take a look at the DOW 30 components to see what I am talking about.

While the pullback was scary and really has people talking about a crash I am just not sure that is going to happen. I do know that there were way too many bulls in the newsletter survey and the AAII survey for a while now. So this should start scaring people to more moderate levels. The put/call jumped to high levels but it did that on Wednesday too just to fall back to low levels on Thursday. It is too volatile and I would like it to stay around the 1 mark for a while to indicate we are getting enough fear in this market to rally again.

Hopefully you have been taking some profits like I have been advising the past week and did not have to give back a lot of profits. All you got to do is go back and read the past six or so entries and look at the comments I have left readers the past week to see that I have been advising profit taking. However, I am still way long and have a lot of charts that look wonderful. Until those charts start throwing up some warning signs I will ride them all the way up.

New Swing Longs: UDRL BKUNA

New Swing Shorts: I am sure I will find some

Longs Outperforming Market: CRED CRDN-49% ERS-54% FFIV TESOF SCHK SWN MCF AIX SRA VSEC-28% RES-142% NTG VLG TMI RAIL-34% ENER-31% FWLT-53% IKAN OMNI RTK-80% RADS ANX-33% BWNG-33% TXCO TWTC-55% DWCH DEZ-84% OMCL GIGM-61% NAK CERS-196% NRPH-105% AUY-56% MMUS RATE-101% KGC-36% ZEUS RITA TGB FLML

Stocks On Radar Screen: GEOI BRNC HOKU HBX AAU HDY DWCH CTE

Blowup Of The Day: SUPX ---This stock hit me with a big punch in the nuts today. Fortunately, I was long it from a long time ago and took some profits recently when I was taking partial profits on my long term winners. A 59% gain turned into a 14% gain. However, it was still a gain. Five months was a long time to hold a stock just to watch it wipe out most of its gains overnight. Oh well. Thanks Regulation FD. You, once again, hurt investors more than helped by not letting the big boys distribute stock slowly before the earnings downgrade and shortfall. If Regulation FD did not exist, certain big holders would have been told that earnings would be bad and could have sold the stock off slowly. That then would have appeared in the charts and anyone who has a cut loss strategy or could tell the big boys were selling could have gotten out. If you say that is not fair, I say BS. These blowups hurt more than they dont. Before Reg. FD there is NO WAY this stock with its earnings woul d have fallen to these levels. Maybe 35 but no way 30. SUPX will be back in the 40's soon. We could have prevented this swoon along with the MANY MANY MANY others by getting rid of a law that helps NO ONE and hurts a lot of investors. The stock was going to fall anyway, Regulation FD or not. It was a matter of a slow fall or a one day crash. Reg FD now makes one day crashes possible.

-----------GOOG and Justice Dept. comments. I have a bone to pick with that too.-------------