A weaker than expected ISM manufacturing index reading helped send stocks into a semi-free fall. The number was the weakest number in over three years and traders did not like that at all. Where is the reverse Dow 12,000 bug
When the final bell rang, the SP 600 led the selloff with a 1.6% decline, the Nasdaq fell 1.4%, the SP 500 fell .7%, and the DJIA fell .4%. The sad news is that leading stocks took it worse with the IBD 100 and IBD 85-85 index both falling over 2%. The SOX index fell 2.1%, indicating speculative money is indeed not around. The SOX is now officially ready to begin its rollover.
Volume was higher on the NYSE and the Nasdaq, marking a clear distribution day for the indexes. This is the first clear distribution day I have seen the whole uptrend.
Breadth was more than 2-to-1 negative on the NYSE and the Nasdaq.
I tell you what the past three weeks or whatever it has been of earnings reports has shown how wild and crazy this uptrend has been. So many stocks make gains just to get destroyed by missing. I keep saying I hate Reg FD but I think I hate this market environment more for its choppiness. Funny thing is the VIX is historically extremely low. Not sure how to swallow that.
What I do understand is the action in my stocks. I have some very nice charts that are acting quite normal but am starting to get profit taking or straight up "sell all" signals with a lot of my holdings. Luckily the majority of the stocks pulling back have already seen me lock in gains and I don't have too much to worry about. My account fell 1.9% on the day and I had well over 2-to-1 negative stocks to up stocks. I would call that a victory, if you ask me.
You have to understand this rally has been built on a foundation of crap. Big cap stocks led the beginning of the rally and after small caps joined they immediately start sputtering. The fact that the SOX has the early look of an index rolling over after failing the breakout in October just adds another warning flag that we must be ready to move to the sidelines in case the selling starts to come in.
A couple more days of the market down on higher volume with some 1% declines will have me worried that this uptrend is about to fail. The fact that many of my prettiest charts produced gains under 100% during this rally was the ultimate tell that the market may not be ready for more gains. If you look at the IBD 100, IBD 85/85, or any other leading stock index you can see they are nowhere near the May highs. This negative divergence must be respected now that the market may come under some selling.
What if the selling doesn't come in? Then you just keep doing what we have been doing the past three months. Buy stocks breaking out of beautiful bases that have excellent fundamentals and if they don't work cut your losses. It is that simple. You just don't go buy everything that I post in my blog as a long. You need to make sure it is a perfect setup for YOU. If the criteria isn't good enough for CANSLIM investors why should you trade it just because I am addicted to trading. My addiction should never be a recommendation to buy stocks like ATCO ICFI INO. Stick to the rules that have proven to work time and again with the greatest stock market winners and you will be fine in the long run.
The technical damage is not severe yet. We just need to be ready for the market to start a down leg. A day like today has a way of scaring traders, and fear has a nasty way of working fast in the markets. Nothing says that is going to happen but after a move like we have had where we didn't see any down days over 1% until recently should raise the level of caution in all traders that a pullback might happen.
I am still tired from the extremely fun night last night on Front Street. I have a question to ask. Is it possible to be more naked than naked? If you were on Front Street last night, you know exactly what I am talking about. But for EVERYONE else that reads this blog (which is everybody) I can only wish you could have seen the beauties and their incredibly HOT HOT HOT costumes. It was a great night!!
I will see you tomorrow at Investors Paradise.
New Swing Longs: D ICFI INO ATCO STSI
New Swing Shorts: NONE
Longs Up On The Day: HMSY-31 AOB-38 HRZ-47 DA-46 MA-70 AUXL-25 KNOL-160 RICK MIKR TNH ICE DUCK LMT IGLD LINTA APLX PCBK TRBN CVLT MAIL CBF OMTR ETE ULTR AZK MNG AXTI AEP NEXC HURN MOS PNW ETR NU AYE DCAI IONA
Take All Profits/Losses: FBNW BDX MDCI MCRS VARI PCTI DSCM CVO TRAD DIOD QSII CGX BVX
Stocks On Radar Screen: BNHN APKT DTE
1 comment:
Hey,
As a novice investor who thinks you are brilliant :)... I was wondering your impression of the market lately. Have you ever seen it so bipolar??? How usual or unusual is this?
I did awesome (and I mean awesome) between Sept of last year to May of this year, but have done very crappy ever since.
It is like I am cherry picking all of the stocks that get beat up despite good valuations and great earnings. Then the moment I give up on the turds after endlessly and stupidly losing money of course they rocket. But everything I continue to hold sucks.
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