Tuesday, February 07, 2006

Nasdaq Sub-Intermediate Trend Turns Down; The Past Month Was Churning On The Nasdaq

The major stock market indexes fell across the board as volume came in higher than yesterday. The SP 600 fell 1.4%, SP 400 1.3%, SP 500 fell .8%, and the Nasdaq fell .6%. The higher volume decline gives the SP 500 and Nasdaq another distribution day. Both indexes are having about one per week the past four weeks and that combined with the higher volume days where we go nowhere indicates churning in the market.

A lot of my longs have turned for the worse and I am selling a lot of them that gave sell signals today. That along with few of my new longs imediately going higher shows me that the market is probably in for a little bit of a rough patch. I don't know how long or how far down it may go or if it is even going to go down much further. But taking precaution now will protect me if things get much worse. I have significant gains since the October bottom and have given some back the past two weeks and don't want to give any more back.

Along with my situation, I noticed the metals and oil commodities slipped quite a bit today. This was the leading sectors of the market coming from the October rally. So if the metals and oils are done that would make sense that the market is done for a while too.

That could be great news because now maybe the market can rotate into a better crop of new stocks in stronger sectors. The metals sectors have few stocks with A+ fundamentals and some new leadership would be healthy for the market. However, all of this is thrown out the window if the downtrend picks up steam. But for some reason, I really doubt that is going to happen. Corporate profits are at all time highs, the markets are relatively inexpensive, and the economy is very strong no matter what the CNN's (Communist News Network) report. There biased facts will never help you make money in stocks.

One of the more obvious facts of weakness in leaders came from the IBD 100 Index. That index fell 3.4% today with many stocks in that index slicing through their 50 day moving averages. That is very bearish when the leaders get hammered like that.

Sell your laggards, raise some cash, take some profits in some big winners, and if you have stocks showing no signs of distribution take some off the table too. Any new buys during this time should be small also. Unless, it a leading stock in a sector that is moving opposite of the market. And if that is the case, you want to see other stocks in the sector making new highs with any new purchase you make.

Who knows, this could be the end of the selling here and we could just go sideways. That is fine with me. That will set up a ton of beautiful bases that will act as solid launching pads for the stocks that lead the next leg up. But we now know the sub-intermediate trend is down for the Nasdaq and the NYSE is acting as if its trend is about to turn down. That along with leading stocks starting to crack after very long price run ups is a harbinger to lower prices not sideways prices.

Good luck out there!

New Swing Longs: LJPC NOVA

New Swing Shorts:

Longs Outperforming Market: BTUI-120% RAIL-52% XRTX VSEC-35% TMI DMC MCX-64% DB CRDN-66% EFII RVSN AIX JBL MDCC-30% RUTH DRH GNBT IED-47% CMPX LCRD-58% GRS-96% VRTX-173% SMDI-59% RBAK-155% WIRE-96% ACTG AKAM-58% STXN-34% BKUNA EFJI SPSX BLD

Shorts Outperforming Market: NONE

Stocks On Radar Screen: ENMC DADE HEC HOM

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