Oh my goodness, there was a lot of tension and angst today. With oil prices flying, earnings concerns, and all the problems Hezbollah and Hamas has created for Israel, markets simply were overwhelmed and sellers took control.
The SP 600 fell 1.9%, the Nasdaq fell 1.7%, the Dow Jones Industrial Average fell 1.5%, and the SP 500 fell 1.3%.
Volume was higher on both the NYSE and the Nasdaq. It was also above the 50 day volume average showing selling conviction by institutional investors. This pickup in volume along with the June lows being breached on the Nasdaq officially ends this rally.
Breadth was very negative to go along with the heavy volume. Decliners led on the NYSE by 3-to-1 margin over advancers and on the Nasdaq it was worse with decliners over advancers by a 4-to-1 margin.
All the talk right now is obviously concentrated on the Middle East. What is taking place over there is without a doubt having an effect on the market. You can even go so far as to say the market saw this coming back in early May. That is when the bull market that began in March 17th ended. As IBD pointed out today historically bull markets rarely last longer than three to four years. How do I know it is over? I don't but this is the first time since the start of the rally I have seen this kind of selling WITHOUT seeing any leaders in tech, innovative, high growth industries showing up on the scans. Instead I am seeing only defensive laggard groups. When these start outperforming with stocks rolling over, you can be assured something is wrong with the market.
The Dow Jones, SP 600, NYSE, and SP 500 have now all failed their 50 dma's and have now broken down through the 200 dma on heavier volume. The death cross has already been given on the Nasdaq and now these other indexes are about to give the late but strong signal that the market is in for some rough times still.
Another stat that blew my mind this morning was the II Survey of newsletter writers. It showed bulls jumping to 42% and bears falling to 33%. That along with the AAII survey showing bulls increasing tells me that there is not nearly enough extreme bearishness in the sentiment surveys to give us a real rally.
It is ugly and the Middle East situation is ugly. Don't blame Israel. They didn't kidnap anyone! Don't let the Middle East ugliness get to you. Keep your head about you and stay calm in the face of fear. Like the RevShark said tonight, "the one great thing certainly about the stock market is that things will eventually change." God isn't that the truth. There is always another bull market around the corner. Is it going to be in three months, six months, one year, or two years? I don't know and I don't care. I will let the market decide for me.
Even in this poor market, my account made significant gains today. When you are on the right side of the market, no matter what direction it is in, like today, it feels pretty darn good. I hope everyone is learning a lot from me during this downtrend. Since I started this blog I have not missed one change in the intermediate trend of the market. I truly hope people have been reading this blog and taking its advice and have avoided the pain that a lot of traders I know are going through. God knows that by the time this downtrend is over, I will be at all time highs in my account. Keep the emotions on the side and play the trend or stay in cash.
Great luck out there. I will see you tomorrow at Investors Paradise.
New Swing Longs: NONE
New Swing Shorts: IYT TM PWC EWQ PLCM PKG VO OPTN CHE SUPX
Longs Outperforming: PAY-38 CTXS-33 CTCI-69 CPY HMSY KHDH
Shorts Outperforming: RES CRXL SWC JOYG DB BPFH USG ELY WSM AMAT RTP TRI AVID MEOH VCG ZRAN MAFB BTH APOL FRZ ISCA GTRC ITWO CTCO GYI XNPT PBE MAS TXRH NAFC ULTI PII CXG AMMD AB EWG RCNI POOL TRMK UPL
Stocks On Radar Screen: RGNC USO
No comments:
Post a Comment