Stocks Reverse To Close Near Their LOD; Volume Was Lower Than Day Before

The early rally the markets had going on for it at the start of the day flattened out and major stock indexes closed near their LODs. The Nasdaq fell .8%, 600 fell .4%, 400 fell .5%, 500 fell .5%, DJ-30 fell .3%. The worst indexes were tech related, with the Nasdaq 100 falling .9% and the SOX falling 1.4%. The blame of the day for this selloff was the Dubai Port deal. LOL. If it isn't one thing it is another. Ridiculous.

The good news from this selloff is that volume came in lower across the board. However, with the breadth continuing to stink up the joint that doesn't give much comfort. But not having today be a distribution day is a positive and a negative. We could be going through a slow drip down. This just frustrates market players unlike any crash could.

Defensive stocks rose again while the indexes came down. It is not a great sign for the market when stocks in the Meat Products, Cleaning Products, and Farm Products lead on up and down days like they have been past two days. This along with the constant cracking of leaders should be a cause for concern. If I was a newbie trader or advised new traders, I would recommend NO new long positions be taken at this point. Too many leaders are acting funny, some are breaking down, and few good charts with quality leadership traits are showing up.

Another negative is the negative divergences in indicators that are showing up in my index charts. TSV, moneystream, and other volume indicators are showing negative divergences. This is not bullish.

It is not like stocks are getting killed but the tone is so negative that finally the weight of the bears is leaving its obvious marks on stocks and the indexes. It looks more like the bulls are willing to sell upticks instead of buy downticks. Like I said that slow drip approach is harder to deal with and act on than a quick crash. It is just harder to predict a bounce when markets are acting like this.

After all the churning in the indexes this year (just look at a daily chart), the indexes are finally starting to get some momentum to the downside. However, despite all that churning and weak recent price action, it is hard to say the market has further to go to the downside.

The put/call ratio is climbing getting near that magical 1.0 closing mark. That along with the higher number of bears and lower number of bulls in both the AAII survey and the II survey says that most traders have gotten bearish already. If that is the case you would think their selling has already been done. If it hasn't then obviously the bull/bear line can cross. The last time it did that was in March 2003 which was the launch for the current rally we have had and may be coming near the end of.

The SP 500, Dow, and Nasdaq are now in short term and sub-intermediate term downtrends.

Keep a smile on your face and stay positive. Bad markets are a necessity for better markets in the future. Good luck out there. We need it.

New Swing Longs: SCVL ECOL IMMR TISA BEL--To learn more about these go to InvestorsParadise and scroll down to the Professional link to Josh Hayes.

Adding To Long/Repurchasing: LIOX

New Swing Shorts: NONE

Longs Outperforming Market: RATE-103% ERS-144% ORA-61% VTS COGO SURG VIMC BLD-40% TMI CRDN-53% BEAS KEYS-44% ICTG-70% SCHK-25% NGPS WIRE-131% BEAV-33% LCRD-88% DECK XRTX KDN BOOM-341% RAIL-59% PETS-144% TWTC-109% LTM WDHD SAY NVDA-61% IHS RSTI SLAB SLW-86% CHE ALTU PEC SSW SMDI-67% LIOX HOM GBN-26% STXN-53% IMOS NENG NDAQ-271% ROK KNOL IT JDSU-58% BGO-26% STEL RUSHA NTO-26% MTU TFR-53% APAC

Shorts Outperforming Market: NONE

Stocks On Radar Screen: NONE

Disappointing Endings: BNT DIET. Still leaving both with gains but oh how the old gains went away in DIET. Truely a sad ending. Oh well. Time to move on.