With no good news to rally on worries over a hard landing for the economy was a good enough reason for market participants to sell on Wall Street. Today was the second straight day of losses for the market.
At the close, the SP 600 led to the downside with a 1% loss, the Nasdaq followed with a .8% loss, the Dow Jones Industrial Average lost .2%, and the SP 500 fell .3%. The bad news came from the IBD 100. That index, once again, led to the downside with a 1.5% whacking, with many stocks falling 2% or more.
Volume came in much lower on the Nasdaq and on the NYSE. The lack of volume to go along with a modest down day that found last hour support is much better than having another distribution day. Breadth came in near 2-to-1 negative on both the Nasdaq and the NYSE. It was a pretty even day.
For the week, the SP 600 was the big loser with a 1.3%, followed by the Nasdaq with a .8% loss, and the Dow Jones Industrial Average and the SP 500 lost .5% and .4% respectively.
The stories of the week seem to me to be the one nobody is talking about. Volume. Look at all the volume the past week on the SP-500 and the Nasdaq. There was lots of it yet prices swung violently for the week and finished down. Now you can say compared to the past week, this week was very positive since we only gave back a little bit of the gains. That is true. That is a bullish trend that has been happening for a month and half. But with all of this volume this week, stocks should have gone up. By not going up we have the setup of a possible churning market.
How do I know it is churning? I don't until after the fact. But a lot of things are lining up that indicate it might in fact be churning. The markets have had distribution days the past week, the VIX is still very low, the yield curve is inverted, oil is breaking down, Fed activity under zero for first time in three years, SOX is lagging, the IBD 100 is lagging, it is the end of September (cycles), the Nasdaq is 100 points higher yet there are more new lows now than then, we are overbought, not all of my longs are immediately showing me huge gains, there are not a TON of quality stock charts, we are overbought on Helene Meisler's adv/dec ovrb/ovrs indicator, and the worst part is the possible wedging double top forming on the SP 500, DJ 30, and NYSE. This is all good enough reason to still have me in way more cash than in stocks.
If the market breaks down, I will be more than happy to start loading up on shorts again. However, we must wait until the market actually agrees with all of the above. The market still shows sign of fear with the put/call ratio staying around the 1 level for the past few days. The fact that the markets are still in an uptrend is the ultimate "don't fight the trend" sign. Ignoring this sign can KILL you. It is the most important sign because it is fact!!
Right now the truth is not many players (including me) are sure what is going to happen. We can make predictions all day but that seems stupid to me and a waste of energy. If this is a healthy pullback or the start of something worse, we will find out via the charts. Right now that picture is mixed. Some longs are working, some are not, but one thing is for sure the ones working aren't giving me huge gains. That is telling of the strength of this market.
Keeping your cash level high is still the smartest play in a market as tricky as this. If there were more charts working and setting up properly this would be easier. However, that is not happening so the smart play is to keep that cash stacked in the old money market account.
It is still about waiting for the right moment. It definitely still isn't here. Until I get more pretty charts and all of the above warning indicators I talked about four paragraphs ago are reversed the perfect moment like the once at the end of 1999, March 2003, and October 2005 is not going to be here anytime soon.
So it is best to stay patient, make quick trades with the nice setups that do occur (unless it is medical, then you ride that trend), cut your losses immediately on the stocks that don't go up right after you buy, keep reviewing your past trades, keep reading and studying, and make sure you use this time to learn how to master the CANSLIM system. While the market acts like a Liberal and gives us no direction, you can act like a responsible professional and prepare yourself to be fully ready for when the next solid uptrend starts.
Stay healthy and positive, and I will see you at Investors Paradise.
New Swing Longs: HH XNR
New Swing Shorts: NONE
Longs Outperforming (low vol non-IBD excluded): AKAM-189 MWRK-27 STEC-25 IHS-67 INPH-31 HSR BEAS HEI VSNT GEO NITE HMSY BEBE INWK DKS TWGP NGPS BMR WEBX LMT HURN SXCI DGX DUCK SEIC KAD BRR IMA
Shorts Outperforming: SWC-44 ZRAN-30 DDE-21 HYDL-18 CPE-20 NGS-16 WTI EXBD USU KMP KMR PTR IXC TDW REP ARLP ATPG SM SPWR DO IPS TTI MDG
Stocks On Radar Screen: CVGR UCTT NFLD
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