Thursday, September 07, 2006

Stocks Get Hit With Another Distribution Day; Not A Great Way To Begin September.

The same data that scared the market yesterday was used as the reason why stocks were weak at the open. Then as the day went on stocks seemed to be firming and ready to mount a rally. Unfortunately, another talking Fed head--Janet Yellen from San Francisco Fed--made hawkish comments about inflation. That helped stocks selloff into the closing bell on higher volume.

By the end of the day, the Dow Jones Industrial Average led to the downside with a .7% loss, the Nasdaq lost .6%, and the SP 500 and SP 600 both lost .5%. The bad news, once again, was the fact that leading stocks led to the downside, with the IBD 100 falling .9%.

Volume was a tad higher on both exchanges, giving the Nasdaq and the NYSE two distribution days in two days. Breadth was running 2-to-1 negative over positives on both exchanges.

This is one tough market, no doubt. If you are long anything over 25% of your account in this tape, you are simply playing with fire here. The market has too many negatives in line right now that makes being 100% long here quite stupid.

The rallies are now being sold, AAII proved today that there is too many bulls, we are overbought on almost EVERY oscillator out there, we have NO new leaders in exciting industries, two distribution days in two days, the IBD 100 continues to lead to the downside and lag to the upside, and negative seasonality with it being September. Is that enough for you?

Fighting the facts stated above seem super silly right now. Cash is kind and until there is more of a solid uptrend investors should remain on the sidelines. There is still nothing to get too worried about but if we get a few more distribution days in the next two weeks I will be really worried that the market may be in serious trouble.

Besides that I have stated everything I can on this market already. This is a tough market and there isn't much sense in trying to trade it unless you enjoy going crazy.

This bad market will only help setup a longer, prettier, and stronger technical pattern that will launch many stocks out of well formed bases. When that will happen, no one knows. We just need to keep our watchlist updated and keep an eye out for any HOT stocks building nice bases. When we start to see a bunch of them then it will be safe to invest long again. Until then the trend is your friend and our friend is confused like a mofo. So let's stay confused with it and stay on the sidelines.

I will see you at Investors Paradise!! Have a great day!!


New Swing Longs: NGPS IGT CHIC GENT

Adding To Positions: AVNC

New Swing Shorts: MTB TDW ITG VOD

Longs Outperforming (low vol non-IBD excluded): Q-95 CXW-26 CTCI-63 IHS-46 AVNC-40 MWRK CHINA HMSY WEBX MA BEBE TRMA LMT ISYS DKS CGX CTCM GISX AHS EMS AIQ LMNX MFA ALTH

Shorts Outperforming: SWC-39 ZRAN-28 GYI-24 XPRSA-15 DDE-15 PII POOL WTI DSL CPF EXBD HYDL FDX USU KNOT SIGI GSF CFC KMP KMR ASH PTR IXC

Completely Cover Shorts: ARO

Stocks On Radar Screen: PEBK BRS CPC DPII CMRG PLM

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