It was another merger filled Monday but this time the mergers didn't help. Stocks started the morning very strong and then reversed with the Nasdaq and SP 600 leading to the downside. At the closing bell, when all was said and done, it was a pretty ugly day.
The SP 600 led to the downside with a 1.2% drop, the Nasdaq fell .9%, the SP 500 fell .3%, and the DJIA fell less than .05% as big caps were the safe haven today. The good news is leading stocks did not lead to the downside. The IBD 85-85 index fell 1% and the IBD 100 fell 1.2%. But that was still even, rather than lower, than the SP 600 which has been leading to the downside the past week.
Volume was lower on both the NYSE and the Nasdaq but how could it not be with quadruple witching on Friday. However, compared to Thursday volume was lower on the NYSE and a tad lower on the Nasdaq. So it is good to see the big boys are not stepping all over each other to sell stocks.
Breadth was negative on both exchanges by a 2-to-1 margin.
The worst performers of the day was the Oil & Gas sectors. The Machinery/Equip group fell 3.6% and the Drilling group fell 3.5%. The funny thing about that is that was looking like a HOT group. The fact that these stocks are acting funny so soon after offering so many beautiful charts is very troubling for the rally. When this many pretty charts breakout out and so many get thrown back that is normally a very important sign to pick up on. We shall see if the stocks can hold support. So far, so good, but there are cracks showing up here.
This was the second straight day the market started very strong and ended pretty weak. This is much much different from the entire rally from the July/August lows. The entire uptrend has not seen back to back days like this. Adding to the problem with this was the fact that we have seen strength turn into weakness all month long on the SP 600.
If these stocks where the hot money chases are not doing well and the big cap indexes are doing well, you know we are near a short term top in the market. When it happens, nobody knows, but the signs are starting to show up.
The entire rally I have few to ZERO stocks that have blown up. Today I had 4 or 5 I believe. This is simply not something that has happened this whole rally and this tells me it is time to start being careful with my new buys and to lighten up on the laggards. I am not selling my strong stocks that show NO sign of selling. But the weaker ones need to start being trimmed back and new buys in the speculative issues needs to even be brought in more.
I started raising more cash last week than I was putting to work and after today's price action I see why. Today is no different. I am raising more cash and putting much less to work before tomorrow's markets. I am still very heavily long with around 285 positions but still no where nearly as heavily weighted as I was. I am almost off of margin.
The good news about this pullback is that it is happening on lower volume. A pullback now is much better than a low volume year end rally that ends with a high volume January selloff like in 2004.
Remember, I am still long a lot of stocks. That means that I have 285 stocks that are still holding above the most recent support and have not given a complete sell signal. This tells me that there could still be plenty of upside in many of my stocks if and when this pullback happens and the uptrend resumes.
I am not worried yet; I have just raised my red warning flags. Newbies should sit back and watch the big boys right now. Wait till the red flags come down.
The surf was HUGE today where I live and it was a blast. Hence the reference above to red flags. It is dangerous conditions here and only experienced surfers of the market should be taking off here.
Aloha and I will see you at Investors Paradise.
New Swing Longs: IPHS WRLS NTLS ADST HURC NAVI BPHX LPHI OMPI
Adding To Longs: TGEN
New Swing Shorts: NONE
Longs Outperforming: IAAC-67 IIVI-30 FTEK-44 ICE-43 FFH-25 BMA-36 PSPT-32 AOI-29 SEIC-25 MAMA-112 UAHC-29 SOFO-99 BAM-53 IIG NYX NHWK AMSF SQM LFL DLB SKX TSRA UAUA MAIL CELG CCO LRCX CVLT BLUD EVEP CTCM TGEN AYE HAS AGR GSIC OEH RHA CMCSA WYNN ETE GVP ATX
Stocks On Radar: AVT RYAAY TELN ONSM CLWT RTSX LYTS ISPH KTEC
Partial Sells: LWAY HOS JCG OSIR RMKR AZK JST BTJ MFRI CNH WPZ MCDT TZIX SUAI APRO BONT HEI CBF CAM PQ IMKTA RRC
Take All Profits/Cut All Losses: MIKR ICFI STSI PRFT OBCI DWSN MNG GLBC GRC DKS WAUW RJET
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